FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 24, 1996
DATAFLEX CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 0-15551 22-2163376
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
3920 Park Avenue, Edison, New Jersey 08820
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code:(908) 321-1100
N/A
(Former name or former address, if changed since last report)
Page 1 of pages
Item 1. Changes in Control of Registrant
Not Applicable
Item 2. Acquisition or Disposal of Assets
Pursuant to an Asset Purchase Agreement dated May 24,
1996, by and among Vanstar Corporation, VST West, Inc.,
Dataflex Corporation and Dataflex Southwest Corporation,
the Company sold certain of its assets and transferred
certain of its liabilities relating to its business
operations, primarily located in the states of California
and Arizona ("Western Region"). These operations
generally involve the sale of goods and services relating
to personal computers, including hardware, operating
systems and software. The closing occurred on May 24,
1996. The purchase price for the assets was $10,000,000
plus the Tangible Net Worth of the Business as of May 31, 1996.
The Company received an initial payment of $36,901,750 representing
the Tangible Net Worth as of March 31, 1996 plus $5,000,000. The
Asset Purchase Agreement provides that the remaining unpaid portion
of the purchase price will be paid in cash as soon as practible
following the completion of an audit of the assets sold and
liabilities transferred, and certain other conditions as defined in
the Asset Purchase Agreement, as of May 31, 1996.
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable
Item 5. Other Events
Not Applicable
Item 6. Resignation of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
Not Applicable
(b) Pro forma financial information
Unaudited pro-forma consolidated balance sheet of
Dataflex as of December 31, 1995 reflecting the
disposition of the Western Region as if the
transaction had occurred as of December 31, 1995.
Unaudited pro-forma consolidated statements of
operations for the nine months ended December 31,
1995 and for the year ended March 31, 1995 as if
the transaction had occurred at the beginning of
the periods indicated.
(c) Exhibits
- Purchase Agreement dated May 24, 1996
Item 8. Change in Fiscal Year.
Not Applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
DATAFLEX CORPORATION
BY: /s/ Richard C. Rose
_________________________
RICHARD C. ROSE, Chairman
Dated: June 10, 1996
<PAGE>
<TABLE>
<CAPTION>
DATAFLEX CORPORATION
PRO-FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
Unaudited
(Thousands)
Pro-forma
Historical Adjustments Pro-forma
<S> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 949 $ 468 $ 481
Accounts receivable, net 76,625 21,543 55,082
Inventory 57,880 6,033 51,847
Deferred tax asset 557 - 557
Other current assets 11,110 3,870 7,240
________ ________ _______
Total current assets 147,121 31,914 115,207
Property and equipment, net 12,767 2,355 10,412
Other assets 882 - 879
Goodwill 32,529 9,073 23,456
________ ________ _______
Total Assets $193,299 $ 43,345 $149,954
________ ________ _______
________ ________ _______
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of
long-term debt $ 7,826 $ 47 $ 7,779
Accounts payable 56,321 6,599 49,722
Accrued expenses and
other payable 9,392 2,862 6,530
________ ________ _______
Total current liabilities 73,539 9,508 64,031
Long-term debt 79,980 32,078 47,902
Deferred tax liability 678 678
Other long-term liabilities 536 210 326
________ ________ _______
Total Liabilities 154,733 41,796 112,937
________ ________ _______
Commitments and contingencies
Stockholders' Equity:
Common stock 22,944 - 22,944
Loans receivable (413) - (413)
Retained earnings 16,630 1,549 15,081
Treasury stock (595) - (595)
________ ________ ______
Total Shareholders' Equity 38,566 1,549 37,017
________ ________ ______
Total Liabilities and
Shareholders' Equity $193,299 $ 43,345 $149,954
________ ________ ______
________ ________ ______
The accompanying notes are an integral part of these pro forma
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DATAFLEX CORPORATION
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995
Unaudited
(Amounts in thousands, except per share amounts)
Pro-forma
Historical Adjustments Pro-forma
<S> <C> <C> <C>
Revenue $340,804 $ 105,264 $235,540
Cost of revenue 302,462 94,622 207,840
________ _________ ________
Gross profit 38,342 10,642 27,700
Selling, general and
administrative expense 30,632 8,470 22,162
Amortization of goodwill 933 299 634
________ ________ ________
Operating income 6,777 1,873 4,904
Interest expense, net 5,716 2,200 3,516
________ ________ ________
Income (loss) before
income taxes 1,061 (327) 1,388
Provision for (benefit
from) income taxes 456 (134) 590
________ ________ ________
Net income (loss) $ 605 $ (193) $ 798
________ ________ ________
________ ________ ________
Income per share $ 0.11 $ 0.15
________ ________
________ ________
The accompanying notes are an integral part of these pro forma
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DATAFLEX CORPORATION
PRO-FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1995
Unaudited
(Amounts in thousands, except per share amounts)
Pro-forma
Historical Adjustments Pro-forma
<S> <C> <C> <C>
Revenue $273,851 $ 98,815 $175,036
Cost of revenue 242,564 87,432 155,132
_______ _________ ________
Gross profit 31,287 11,383 19,904
Selling, general and
administrative expense 24,259 9,188 15,071
Amortization of goodwill 594 333 261
_______ ________ _______
Operating income 6,434 1,862 4,572
Interest expense, net 2,677 1,978 699
Income (loss) before
income taxes 3,757 (116) 3,873
Provision for (benefit from)
income taxes 1,618 (48) 1,666
_______ ________ ________
Net income (loss) $ 2,139 $ (68) $ 2,207
_______ ________ ________
_______ ________ ________
Income per share $ 0.45 $ 0.47
_______ ________ ________
_______ ________ ________
</TABLE>
The accompanying notes are an integral part of these pro forma
consolidated financial statements.
<PAGE>
Dataflex Corporation
Notes to Unaudited Consolidated
Condensed Pro Forma Financial Statements
1. As described in Item 2, on May 24, 1996, Dataflex completed
the sale of certain of its business operations located
primarily in California and Arizona (the "Western Region").
Dataflex's historical financial results have been restated
on a pro forma basis to reflect these transactions. These
pro forma consolidated financial statements should be read
in conjunction with the historical consolidated financial
statements and notes thereto of Dataflex. Additionally, the
pro forma consolidated financial statements are not
necessarily indicative of the actual results that would have
been achieved had the transaction occurred on those dates,
nor are they necessarily indicative of future results.
2. All summary consolidated balance sheet pro-forma adjustments
assume the transaction giving rise to the adjustments was
consummated on the balance sheet date. The pro forma
balance sheet adjustments give effect for the disposition of
substantially all tangible assets and certain liabilities of
the Western Region. Dataflex currently estimates that any
subsequent adjustment to the sale price of the Western
Region will not be material and the pro forma financial
statements do not reflect any subsequent increase or
decrease to the sale price.
Net proceeds from the sale of the Western Region have been
reflected as a reduction of debt.
3. All summary consolidated statement of operations pro-forma
adjustments assume the transaction giving rise to the
adjustments was consummated immediately prior to the first
day of the period presented; accordingly, the loss from the
transaction is not reflected in the consolidated statement
of operations for the period presented. Dataflex currently
estimates that any subsequent adjustment to the sale price
of the Western Region will not be material and the pro forma
financial statements do not reflect any subsequent increase
or decrease to the sale price.
The pro forma consolidated statement of operations gives
effect for the following unaudited pro forma adjustments:
(i) Elimination of the results of operations
associated with the Western Operations for the
periods presented.
(ii) Elimination of interest expense based on the
assumed reduction in debt.
(iii) Calculation of the pro-forma tax provision using
the statutory rates for the periods presented in
accordance with generally accepted accounting
principles.
<PAGE>
EXHIBIT A
ASSET PURCHASE AGREEMENT
by and among
VANSTAR CORPORATION,
VST WEST, INC.
and
DATAFLEX CORPORATION,
DATAFLEX SOUTHWEST CORPORATION
Dated
MAY 24, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I SALE AND PURCHASE OF THE ASSETS; DEFINITIONS.
1.1 Assets . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets. . . . . . . . . . . . . . . . . . . 3
1.3 Definition of Certain Terms. . . . . . . . . . . . . 3
ARTICLE II THE CLOSING . . . . . . . . . . . . . . . . . . 13
2.1 Place and Date . . . . . . . . . . . . . . . . . . . 13
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . 13
2.2.1 Closing Date Payment. . . . . . . . . . . . . . 13
2.2.2 Certain Additional Potential Payments . . . . . 13
2.2.3 Payment to IBM Credit . . . . . . . . . . . . . 13
2.3 Designation of Inventory Components. . . . . . . . . 13
2.4 Valuation of Asset Components. . . . . . . . . . . . 14
2.5 Effect of Valuations, Return of Certain Assets . . . 14
2.6 Escrow Agreement . . . . . . . . . . . . . . . . . . 18
2.7 Arrangements Related to the Indemnity Basket . . . . 19
2.8 Allocation of Purchase Price . . . . . . . . . . . . 19
2.9 Assumption of Liabilities. . . . . . . . . . . . . . 19
2.10 Excluded Liabilities . . . . . . . . . . . . . . . . 20
2.11 Consent of Third Parties . . . . . . . . . . . . . . 20
2.12 Intellectual Property Licenses . . . . . . . . . . . 21
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . 22
3.1 Representations and Warranties of Sellers. . . . . . 22
3.1.1 Authorization, etc. . . . . . . . . . . . . . 22
3.1.2 Corporate Status. . . . . . . . . . . . . . . . 22
3.1.3 No Conflicts, etc.. . . . . . . . . . . . . . . 23
3.1.4 Financial Statements. . . . . . . . . . . . . . 23
3.1.5 Absence of Undisclosed Liabilities. . . . . . . 23
3.1.6 Taxes . . . . . . . . . . . . . . . . . . . . . 24
3.1.7 Absence of Changes. . . . . . . . . . . . . . . 25
3.1.8 Litigation. . . . . . . . . . . . . . . . . . . 27
3.1.9 Compliance with Laws; Governmental
Approvals and Consents; Governmental Contracts. 28
3.1.10 Operation of the Business . . . . . . . . . . 28
3.1.11 Assets. . . . . . . . . . . . . . . . . . . . 28
3.1.12 Contracts . . . . . . . . . . . . . . . . . . 29
3.1.13 Territorial Restrictions. . . . . . . . . . . 31
3.1.14 Inventories . . . . . . . . . . . . . . . . . 31
3.1.15 Customers . . . . . . . . . . . . . . . . . . 32
3.1.16 Suppliers. . . . . . . . . . . . . . . . . . 32
3.1.17 Product Warranties. . . . . . . . . . . . . . 32
3.1.18 Absence of Certain Business Practices . . . . 33
3.1.19 Intellectual Property . . . . . . . . . . . . 33
3.1.20 Insurance . . . . . . . . . . . . . . . . . . 35
3.1.21 Real Property . . . . . . . . . . . . . . . . 35
3.1.22 Environmental Matters . . . . . . . . . . . . 35
3.1.23 Employees, Labor Matters, etc . . . . . . . . 36
3.1.24 Employee Benefit Plans. . . . . . . . . . . . 37
3.1.25 Confidentiality . . . . . . . . . . . . . . . 37
3.1.26 No Guarantees . . . . . . . . . . . . . . . . 37
3.1.27 Records . . . . . . . . . . . . . . . . . . . 37
3.1.28 Brokers, Finders, etc . . . . . . . . . . . . 37
3.1.29 Disclosure. . . . . . . . . . . . . . . . . . 38
3.1.30 Receivables . . . . . . . . . . . . . . . . . 38
3.1.31 Backlog . . . . . . . . . . . . . . . . . . . 38
3.1.32 Liabilities to Affiliates . . . . . . . . . . 38
3.1.33 Excluded Businesses . . . . . . . . . . . . . 39
3.2 Representations and Warranties of Vanstar and Buyer. 39
3.2.1 Corporate Status; Authorization, etc. . . . . . 39
3.2.2 No Conflicts, etc . . . . . . . . . . . . . . . 39
3.2.3 Litigation. . . . . . . . . . . . . . . . . . . 39
3.2.4 Brokers, Finders, etc . . . . . . . . . . . . . 40
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . 40
4.1 Covenants of Sellers . . . . . . . . . . . . . . . . 40
4.1.1 Conduct of Business . . . . . . . . . . . . . . 40
4.1.2 No Solicitation . . . . . . . . . . . . . . . . 41
4.1.3 Access and Information. . . . . . . . . . . . . 41
4.1.4 Public Announcements. . . . . . . . . . . . . . 42
4.1.5 Further Actions . . . . . . . . . . . . . . . . 42
4.1.6 Further Assurances. . . . . . . . . . . . . . . 42
4.1.7 Liability for Transfer Taxes. . . . . . . . . . 43
4.1.8 Certificates of Tax Authorities . . . . . . . . 43
4.2 Covenants of Vanstar and Buyer . . . . . . . . . . . 43
4.2.1 Public Announcements. . . . . . . . . . . . . . 43
4.2.2 Further Actions . . . . . . . . . . . . . . . . 44
4.2.3 Conduct of the Business . . . . . . . . . . . . 45
4.2.4 Further Assurances. . . . . . . . . . . . . . . 45
4.2.5 Sellers' Records. . . . . . . . . . . . . . . . 45
4.2.6 Performance by Buyer. . . . . . . . . . . . . . 46
4.3 Use of Business Names by Buyer . . . . . . . . . . . 46
ARTICLE V CONDITIONS PRECEDENT. . . . . . . . . . . . . . 46
5.1 Conditions to Obligations of Each Party. . . . . . . 46
5.1.1 HSR Act Notification. . . . . . . . . . . . . . 46
5.1.2 No Injunction, etc. . . . . . . . . . . . . . . 46
5.2 Conditions to Obligations of Buyer . . . . . . . . . 47
5.2.1 Representations, Performance. . . . . . . . . . 47
5.2.2 Financing . . . . . . . . . . . . . . . . . . . 47
5.2.3 Consents. . . . . . . . . . . . . . . . . . . . 47
5.2.4 No Material Adverse Effect. . . . . . . . . . . 47
5.2.5 Opinion of Counsel. . . . . . . . . . . . . . . 48
5.2.6 Corporate, Other Proceedings. . . . . . . . . . 48
5.2.7 Transfer Documents. . . . . . . . . . . . . . . 48
5.2.8 Vendor Arrangements . . . . . . . . . . . . . . 48
5.2.9 COBRA Obligations . . . . . . . . . . . . . . . 49
5.2.10 Certain Employment Arrangements . . . . . . . 49
5.2.11 Accounting Matters. . . . . . . . . . . . . . 49
5.3 Conditions to Obligations of Seller. . . . . . . . . 49
5.3.1 Representations, Performance, etc . . . . . . . 49
5.3.2 Assumption Agreement. . . . . . . . . . . . . . 50
5.3.3 Opinion of Counsel. . . . . . . . . . . . . . . 50
5.3.4 Corporate Proceedings . . . . . . . . . . . . . 50
5.3.5 Consents and Approvals. . . . . . . . . . . . . 50
5.3.6 Collateral Agreements . . . . . . . . . . . . . 50
ARTICLE VI EMPLOYEES AND EMPLOYEE BENEFIT PLANS. . . . . . 50
6.1 Employment of Sellers' Employees . . . . . . . . . . 50
6.2 Welfare and Benefit Plans. . . . . . . . . . . . . . 52
6.3 Workers Compensation . . . . . . . . . . . . . . . . 53
6.4 Employment Taxes . . . . . . . . . . . . . . . . . . 53
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . 53
7.1 Termination. . . . . . . . . . . . . . . . . . . . . 53
7.2 Effect of Termination. . . . . . . . . . . . . . . . 54
ARTICLE VIII NON-COMPETITION AND DELIVERY OF FINANCIAL
STATEMENTS. . . . . . . . . . . . . . . . . . . 54
8.1 Non-Competition. . . . . . . . . . . . . . . . . . . 54
8.2 Delivery of Audited Financial Statements . . . . . . 55
ARTICLE IX INDEMNIFICATION . . . . . . . . . . . . . . . . 55
9.1 Indemnification By Sellers.. . . . . . . . . . . . . 55
9.2 Treatment of Sellers . . . . . . . . . . . . . . . . 56
9.3 Indemnification By Vanstar and Buyer . . . . . . . . 57
9.4 Adjustments to Indemnification Payments. . . . . . . 57
9.5 Indemnification Procedures . . . . . . . . . . . . . 57
9.6 Time Limitation. . . . . . . . . . . . . . . . . . . 58
9.7 Survival of Representations and Warranties, etc. . . 58
ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 59
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . 59
10.2 Severability . . . . . . . . . . . . . . . . . . . . 59
10.3 Notices. . . . . . . . . . . . . . . . . . . . . . . 59
10.4 Headings . . . . . . . . . . . . . . . . . . . . . . 60
10.5 Entire Agreement . . . . . . . . . . . . . . . . . . 60
10.6 Counterparts . . . . . . . . . . . . . . . . . . . . 60
10.7 Governing Law, etc . . . . . . . . . . . . . . . . . 60
10.8 Binding Effect . . . . . . . . . . . . . . . . . . . 60
10.9 Assignment . . . . . . . . . . . . . . . . . . . . . 60
10.10 No Third Party Beneficiaries . . . . . . . . . . . . 61
10.11 Amendment; Waivers, etc. . . . . . . . . . . . . . . 61
<PAGE>
SCHEDULES
Schedule No.
Excluded Assets . . . . . . . . . . . . . . . . . . . . .1.2
Additional Assumed Liabilities. . . . . . . . . . 2.9(a)(ii)
Jurisdictions of Dataflex and DSC . . . . . . . . . 3.1.2(b)
Consents. . . . . . . . . . . . . . . . . . . . . . . .3.1.3
Extraordinary Costs and Adjustments to
Annual Financial Statements . . . . . . . . . . . . .3.1.4
Liabilities, including, Employee Vacation
Time, Vacation Pay, Severance, Etc. . . . . . . . . .3.1.5
Contested Taxes . . . . . . . . . . . . . . . . . . 3.1.6(a)
Extension for Period of Assessments on Taxes. . . . 3.1.6(b)
Assertion of Taxes Owed . . . . . . . . . . . . . . 3.1.6(c)
Litigation, Administrative Appeal of Taxes. . . . . 3.1.6(e)
Changes Outside Ordinary Course of Business . . . . . .3.1.7
Actions, Claim, Etc.. . . . . . . . . . . . . . . . . .3.1.8
Compliance with Applicable Law Exception. . . . . . 3.1.9(a)
Governmental Approvals. . . . . . . . . . . . . . . 3.1.9(b)
Governmental Contracts. . . . . . . . . . . . . . . 3.1.9(c)
Business Operations Through Direct or
Indirect Subsidiary. . . . . . . . . . . . . . . . . .3.1.10
Permitted Liens . . . . . . . . . . . . . . . . . . . 3.1.11
Agreements, Contracts, Commitments. . . . . . . . .3.1.12(a)
Events of Default on Contracts, Etc.. . . . . . . .3.1.12(c)
Territorial Restrictions. . . . . . . . . . . . . . . 3.1.13
Location of Inventories . . . . . . . . . . . . . . . 3.1.14
Customer Lists. . . . . . . . . . . . . . . . . . . . 3.1.15
Suppliers . . . . . . . . . . . . . . . . . . . . . . 3.1.16
Warranties. . . . . . . . . . . . . . . . . . . . . . 3.1.17
Intellectual Property . . . . . . . . . . . . . . .3.1.19(a)
Intellectual Property Exceptions. . . . . . . . . .3.1.19(b)
Leased or Licensed Intellectual Property. . . . . .3.1.19(d)
Intellectual Property Litigation. . . . . . . . . .3.1.19(e)
Restrictions on Use of Name and Mark. . . . . . . .3.1.19(g)
Insurance Policies. . . . . . . . . . . . . . . . . . 3.1.20
Leases. . . . . . . . . . . . . . . . . . . . . . .3.1.21(b)
Collective Bargaining Agreements. . . . . . . . . . . 3.1.23
Pension, Bonuses & Other Compensation . . . . . . . . 3.1.24
Confidentiality Exceptions. . . . . . . . . . . . . . 3.1.25
Guarantee Exceptions. . . . . . . . . . . . . . . . . 3.1.26
Receivables . . . . . . . . . . . . . . . . . . . . . 3.1.30
Backlog . . . . . . . . . . . . . . . . . . . . . . . 3.1.31
Governmental Approval and Other Consents
Required by Vanstar and/or Buyer. . . . . . . . . . .3.2.2
Operating and Applications Software . . . . . . . . 5.2.5(b)
Material Differences in Financials . . . . . . . . . 5.2.11
EXHIBITS
Exhibit A Transferred Affiliate Receivables
Exhibit B Assumption Agreement
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") dated as of
May 24, 1996, by and among VANSTAR CORPORATION, a Delaware
corporation ("Vanstar"), VST WEST, INC., a Delaware corporation
and a wholly-owned subsidiary of Vanstar ("Buyer"), DATAFLEX
CORPORATION, a New Jersey corporation ("Dataflex"), and DATAFLEX
SOUTHWEST CORPORATION, an Arizona corporation and a wholly-owned
subsidiary of Dataflex ("DSC"). (Dataflex and DSC are sometimes
herein referred to singularly as a "Seller" and collectively as
the "Sellers").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Sellers,
Vanstar and Buyer have determined that it would be in their
respective best interests for Buyer to acquire the Business (as
hereinafter defined) from Sellers in consideration of the payment
by Buyer of the consideration provided for herein including the
assumption and discharge by Buyer of the Assumed Liabilities (as
hereinafter defined); and
WHEREAS, the respective Boards of Directors of Sellers,
Vanstar and Buyer have determined that the above described ends
can be effectively accomplished by the execution, delivery and
performance of this Agreement and have authorized the same;
NOW, THEREFORE, in consideration of the mutual promises,
representations and warranties herein contained, and on the terms
and subject to the conditions herein set forth, the parties
hereto agree as follows:
ARTICLE I SALE AND PURCHASE OF THE ASSETS; DEFINITIONS
1.1 Assets. Subject to and upon the terms and conditions
set forth in this Agreement, at the Closing, Sellers will sell,
transfer, convey, assign and deliver to Buyer, and Buyer will
purchase or acquire from Sellers all right, title and interest of
each Seller in and to all the properties, assets and rights of
every nature, kind and description, tangible and intangible
(including goodwill), whether real, personal or mixed, whether
accrued, contingent or otherwise, owned or leased by each Seller
or otherwise used or useable by either Seller in or with respect
to the Business as of the Cut-off Date, or acquired by either
Seller or any of their Affiliates between the Cut-off Date and
the Closing, whether or not described or referred to herein and
which are used in or with respect to the Business (all of which,
other than the Excluded Assets, are hereinafter collectively
referred to as the "Assets"), including, without limitation, all
those items in the following categories that conform to the
definition of the term "Assets":
(a) all fixed assets, equipment, furniture,
furnishings, vehicles, tools, and similar property (including,
but not limited to, any residual values under leases or similar
arrangements relating to any of the foregoing);
(b) all inventories of raw materials, work in process,
finished products, goods, Spare Parts, office and other supplies,
including any of such of inventories held at any location
controlled by either Seller or at any other location (pursuant to
conditional sales agreements, consignment arrangements or in any
bailment or otherwise) and any such items previously purchased
and in transit to either Seller at any such locations (the
"Inventories");
(c) all replacements, components, devices, equipment
and other similar items owned or held by either Seller for use in
connection with the repair, replacement, modification,
customization or installation of goods and products applicable to
the Business ("Spare Parts");
(d) all rights in and to products sold or leased by
either Seller (including, but not limited to, products hereafter
returned or repossessed and unpaid Sellers' rights of rescission,
replevin, reclamation and rights to stoppage in transit);
(e) all of the rights of each Seller under all
contracts, arrangements, licenses, leases and other agreements,
including, without limitation, any right to receive payment for
products sold or services rendered, and to receive goods and
services, pursuant to such agreements and to assert claims and
take other rightful actions in respect of breaches, defaults and
other violations of such contracts, arrangements, licenses,
leases and other agreements and otherwise;
(f) all cash, deposits in transit, credits, prepaid
expenses, deferred charges, advance payments, security deposits
and prepaid items;
(g) all notes and accounts receivable held by either
Seller or of which either Seller is the beneficial holder and all
notes, bonds and other evidences of indebtedness of and rights to
receive payments from any Person held by either Seller ("Accounts
Receivable"), including, also, any amounts owing to either of the
Sellers from vendors of goods and products used in the Business
resulting from discounts for prompt payment, volume discounts,
promotional programs or similar vendor special pricing and term
arrangements ("Vendor Receivables");
(h) all Intellectual Property and all rights
thereunder or in respect thereof primarily relating to or used or
held for use in connection with the Business (other than the name
"Dataflex" and related service marks, trademarks and trade names
specifically set forth in the Excluded Assets), including, but
not limited to, rights to enforce and remedies against past,
present and future infringements thereof, and rights of priority
and protection of interests therein under the laws of any
jurisdiction worldwide and all tangible embodiments thereof,
together with all Intellectual Property rights included in the
other clauses of this Section 1.1 (the "Intellectual Property
Assets");
(i) all books, records, manuals and other materials
(in any form or medium) other than the originals of Sellers'
corporate minute books and similar records (copies of which will
be provided to Vanstar and Buyer), including, without limitation,
all records and materials maintained at the headquarters of
either Seller, advertising matter, catalogues, price lists,
correspondence, mailing lists, lists of customers, customer files
and customer credit histories, distribution lists, photographs,
production data, sales and promotional materials and records,
purchasing materials and records, contract forms, technical data,
graphic materials, drawings, designs, personnel records, salary
records, manufacturing and quality control records and
procedures, blueprints, research and development files, records,
data and laboratory books, Intellectual Property disclosures,
media materials and plates, accounting records, sales order files
and litigation files, but not including the books, records, names
and other materials which relate solely to the "Dataflex" name
and other related service marks, trademarks and trade names
expressly set forth in the Excluded Assets);
(j) to the extent their transfer is permitted by law,
all Governmental Approvals, including all applications therefor,
if any;
(k) all rights to causes of action, lawsuits,
judgments, claims and demands of any nature available to or being
pursued by either Seller with respect or relating to the Business
or the ownership, use, function or value of any Asset (other than
the Excluded Assets and Excluded Liabilities), whether arising by
way of counterclaim or otherwise; and
(l) all guarantees, warranties, indemnities and
similar rights in favor of either Seller with respect to any
Asset.
Subject to the terms and conditions hereof, at the Closing,
the Assets shall be transferred or otherwise conveyed to Buyer
free and clear of all liabilities, obligations, liens and
encumbrances, excepting only Assumed Liabilities, Liens listed on
Schedule 3.1.11, and Permitted Liens.
1.2 Excluded Assets. Sellers will retain and not transfer,
and Buyer will not purchase or acquire (i) the assets and
liabilities specifically described on Schedule 1.2 identified as
relating to Sellers' Valtron Business and Onyx Business (ii) any
and all Affiliate Receivables (other than those set forth on
Exhibit A hereto, which shall be transferred to Buyer as part of
the Assets), and (iii) the other assets specifically described on
Schedule 1.2 (collectively, the "Excluded Assets").
1.3 Definition of Certain Terms. The terms defined in this
Section 1.3, whenever used in this Agreement (including in the
Schedules), shall have the respective meanings indicated below
for all purposes of this Agreement. All references herein to a
Section, Article or Schedule are to a Section, Article or
Schedule of or to this Agreement, unless otherwise indicated.
Accepted Spare Parts: shall mean the Spare Parts which
Vanstar and Buyer, after consultation with Sellers, reasonably
believe will be utilized in connection with Vanstar's and Buyer's
conduct of the Business prior to the 270th day following the
Closing Date, as determined by Vanstar and Buyer promptly
following the Closing, as provided in Section 2.3. In making the
determination called for with regard to Accepted Spare Parts, to
the extent that Sellers shall be unable to provide records
regarding "run rates" or historical utilization of Spare Parts in
connection with the Business, the parties agree to utilize
Vanstar's records with regard thereto or Vanstar's good faith
estimates thereof, in any event in consultation with Sellers.
Accounts Receivable: as defined in Section 1.1.
Affiliate: of a Person means a Person that directly or
indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the first Person.
"Control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of the management
policies of a Person, whether through the ownership of voting
securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
Affiliate Receivables: any account or note receivable
owing by Dataflex to DSC or by DSC to Dataflex or otherwise
relating to any intercompany obligations among Dataflex and its
Affiliates, and any account or note receivable or other payment
obligation of any officer, director, employee or Affiliate of
either of the Sellers.
Agreement: this Asset Purchase Agreement, including
the Schedules hereto.
Annual Financial Statements: as defined in Section
3.1.4.
Applicable Law: all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including the common
law), rules, regulations, ordinances, codes or orders of any
Governmental Authority, (ii) Governmental Approvals and (iii)
orders, decisions, injunctions, judgments, awards and decrees of
or agreements with any Governmental Authority.
AR Adjustment Amount: as defined in Section 2.5.
Assets: as defined in Section 1.1.
Assumed Liabilities: as defined in Section 2.9.
Assumption Agreement: as defined in Section 2.9.
Available for Sale: shall mean Inventory (other than
Spare Parts) held in the ordinary course for sale to the public
with the expectation, determined by Vanstar and Buyer, after
consultation with Sellers, promptly following the Closing as
provided in Section 2.3, that such Inventory will be sold,
subject to existing economic and market conditions in the normal
course of business and that no part of such inventory consists of
obsolete items, items no longer being produced by the
manufacturer thereof or items representing an earlier version of
a product which has been the subject of modifications, material
fixes, a subsequent version release or intervening model.
Business: the business acquired or to be acquired by
Buyer pursuant to this Agreement, consisting of the Assets, and
the Assumed Liabilities (but not including the Excluded Assets
and Excluded Liabilities), and which may be more particularly
described as certain of the business operations of Dataflex and
all of the business operations of DSC, commonly referred to as
the Dataflex Western Region and Dataflex Southwest Region
businesses, including all of the business operations which have
been conducted by DSC since its formation and the similar type of
business operations conducted directly by Dataflex in the
Business Territory involving generally the sale of goods, or the
provision of services (including repair and maintenance
services), relating to, personal computers, client servers,
computer networks, communication equipment, other equipment
relating thereto, such as computer monitors and peripherals and
other individual components, operating systems and applications
software and other software (including software created for use
on the internet) created for use in tie-in arrangements, customer
service and internal management systems for sales, delivery and
support.
Business Day: shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York City
are authorized or required to close.
Business Financial Statements: as defined in Section
3.1.4.
Business Territory: shall mean the states of Arizona,
California, Colorado, New Mexico, Nevada and Utah.
Buyer: as defined in the preamble of this Agreement.
Buyer Indemnitees: as defined in Section 9.1.
Buyer's Accountants: Ernst & Young.
CERCLA: the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 9601 et
seq.
Closing: the Closing as defined in Section 2.1.
Closing Date: as defined in Section 2.1.
Closing Date Payment: as defined in Section 2.2.1
Code: the Internal Revenue Code of 1986, as amended.
Collateral Agreements: the agreements and other
documents and instruments described in Sections 5.2.8 and the
Escrow Agreement.
Consent: any consent, approval, authorization, waiver,
permit, grant, franchise, concession, agreement, license,
exemption or order of, registration, certificate, declaration or
filing with, or report or notice to, any Person, including but
not limited to any Governmental Authority.
Contract: as defined in Section 3.1.12(a).
Covered Returns: as defined in Section 3.1.6.
Covered Taxes: as defined in Section 3.1.6.
Cut-off Date Balance Sheet: as defined in Section
3.1.4.
Cut-off Date: March 31, 1996.
Dataflex: as defined in the Preamble of this
Agreement.
Determination Date: May 31, 1996.
Discontinued With Current Orders: shall mean Inventory
(other than Spare Parts) not meeting the definition of Available
for Sale but for which either of the Sellers has firm purchase
orders or binding contracts for sale thereof with unaffiliated
third parties, as determined by Vanstar and Buyer at the Closing.
Discontinued with No Demand shall mean Inventory (other
than Spare Parts) which does not constitute Available for Sale
and with regard to which none of Vanstar, Buyer or either of the
Sellers has firm purchase orders or contractual commitments, as
determined by Vanstar and Buyer promptly following the Closing,
as provided in Section 2.3.
DSC: as defined in the Preamble of this Agreement.
Employee Benefit Plan: as defined in Section 3.1.24.
Environmental Laws: all Applicable Laws relating to
the protection of the environment, to human health and safety, or
to any emission, discharge, generation, processing, storage,
holding, abatement, existence, Release, threatened Release or
transportation of any Hazardous Substances, including, without
limitation, (1) CERCLA, the Resource Conservation and Recovery
Act, and the Occupational Safety and Health Act, (ii) all other
requirements pertaining to reporting, licensing, permitting,
investigation or remediation of emissions, discharges, releases
or threatened releases of Hazardous Materials into the air,
surface water, ground water or land, or relating to the
manufacture, processing, distribution, use, sale, treatment,
receipt, storage, disposal, transport or handling of Hazardous
Substances, and (iii) all other requirements pertaining to the
protection of the health and safety of employees or the public.
Environmental Liabilities and Costs: all Losses,
whether direct or indirect, known or unknown, current or
potential, past, present or future, imposed by, under or pursuant
to Environmental Laws, including, without limitation, all Losses
related to Remedial Actions, and all fees, disbursements and
expenses of counsel, experts, personnel and consultants based on,
arising out of or otherwise in respect of: (i) the ownership or
operation of the Business, the Leased Real Property or any other
real properties, assets, equipment or facilities, by either
Seller, or any of their predecessors or Affiliates; (ii) the
environmental conditions existing on the Closing Date on, under,
above, or about any Leased Real Property or any other real
properties, assets, equipment or facilities currently or
previously owned, leased or operated by either Seller, or any of
their predecessors or Affiliates; and (iii) expenditures
necessary to cause any Leased Real Property or any aspect of the
Business to be in compliance with any and all requirements of
Environmental Laws as of the Closing Date, including, without
limitation, all Environmental Permits issued under or pursuant to
such Environmental Laws, and reasonably necessary to make full
economic use of any Leased Real Property.
Environmental Permits: any federal, state and
local permit, license, registration, consent, order,
administrative consent order, certificate, approval or other
authorization with respect to either Seller necessary for the
conduct of the Business as currently conducted or previously
conducted under any Environmental Law.
ERISA: the Employee Retirement Income Security Act of
1974, as amended.
Escrow Agent: as defined in Section 2.6.
Escrow Agreement: as defined in Section 2.6.
Excluded Assets: as defined in Section 1.2.
Excluded Liabilities: as defined in Section 2.10.
Expected Closing Date: May 24, 1996.
Financial Statements: as defined in Section 3.1.4.
GAAP: generally accepted accounting principles as in
effect in the United States as of the date of any application
thereof.
Governmental Approval: any Consent of, with or from
any Governmental Authority.
Governmental Authority: any nation or government, any
state or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government,
including, without limitation, any government authority, agency,
department, board, commission or instrumentality of the United
States, any State of the United States or any political
subdivision thereof, and any tribunal or arbitrator(s) of
competent jurisdiction, and any self-regulatory organization.
Hazardous Substances: any substance that: (i) is or
contains asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum or petroleum-derived
substances or wastes, radon gas or related materials (ii)
requires investigation, removal or remediation under any
Environmental Law, or is defined, listed or identified as a
"hazardous waste" or "hazardous substance" thereunder, or (iii)
is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and
is regulated by any Governmental Authority or Environmental Law.
HSR Act: the Hart-Scott-Rodino Anti-trust Improvements
Act of 1976, as amended.
IBM Credit: IBM Credit Corp.
IBM Liabilities: any debts or liabilities owed by
Sellers, or either of them, under the Inventory and Working
Capital Financing Agreement between Dataflex and IBM Credit or
the Inventory and Working Capital Financing Agreement between IBM
Credit and DSC, in each case dated as of December 28, 1994, as
amended.
Indemnity Basket: as defined in Section 2.7.
Indemnified Party: as defined in Section 9.5.
Indemnifying Party: as defined in Section 9.5.
Intellectual Property: except to the extent
specifically included in Schedule 1.2 as part of the Excluded
Assets, any and all United States and foreign: (a) patents
(including reexaminations, design patents, industrial designs and
utility models) and patent applications (including docketed
patent disclosures awaiting filing, provisional applications,
reissues, divisions, continuations, continuations-in-part and
extensions), patent disclosures awaiting filing determination,
inventions and improvements thereto;
(b) trademarks, service marks, trade names, trade dress,
logos, business and product names, slogans, and registrations and
applications for registration thereof; (c) copyrights (including
software) and registrations thereof but excluding the Sellers'
names, and also excluding all of Sellers' rights, title and
interests in and otherwise with respect to Sellers' "Flex Direct
Catalogue"; (d) inventions, processes, designs, formulae, trade
secrets, know-how, industrial models, confidential and technical
information, manufacturing, engineering and technical drawings,
product specifications and confidential business information; (e)
mask work and other semiconductor chip rights and registrations
thereof; (f) intellectual property rights similar to any of the
foregoing; (g) copies and tangible embodiments thereof (in
whatever form or medium, including electronic media).
Intellectual Property Assets: as defined in Section
1.1.
Inventories: as defined in Section 1.1.
Inventory Difference: as defined in Section 2.5(a).
IRS: the Internal Revenue Service.
Leased Real Property: means all interests leased
pursuant to the Leases.
Leases: means the real property leases, subleases,
licenses and occupancy agreements pursuant to which the
respective Seller is the lessee, sublessee, licensee or occupant
which relate to or are being used in the Business and which are
described on Schedule 3.1.21(b).
Lien: any mortgage, pledge, hypothecation, right of
others, claim, security interest, encumbrance, lease, sublease,
license, occupancy agreement, adverse claim or interest,
easement, covenant, encroachment, burden, title defect, title
retention agreement, voting trust agreement, interest, equity,
option, lien, right of first refusal, charge or other
restrictions or limitations of any nature whatsoever, including
but not limited to such as may arise under any Contracts.
Losses: as defined in Section 9.1.
Marked Materials: as defined in Section 4.3.
Material Adverse Effect: with regard to any Person,
any event, occurrence, fact, condition, change or effect that
individually or in the aggregate with similar events,
occurrences, facts, conditions, changes or effects will or can
reasonably be expected to result in a cost, expense, charge,
liability, loss of revenue or diminution in value equal to or
greater than $100,000.
Maximum Liability: shall mean an amount equal to the
stated liabilities of the Business incurred in the ordinary
course, other than the IBM Liabilities, as properly reflected in
the balance sheet constituting a part of the Net Worth Report.
National Account: as defined in Section 8.1(b).
Net Value: shall mean, with regard to any asset or
asset class, the value assigned thereto on the books and records
of the Business, giving effect to any asset or asset class
specific reserves for discounts applied, bad debts, shrinkage,
obsolescence or the like, as applicable.
Net Worth Report: as defined in Section 2.5(d) hereof.
Onyx Agreement: the agreement between Tony Goolsby and
Dataflex dated as of June __ [date unspecified], 1994 pursuant to
which such parties conduct the Onyx Business.
Onyx Business: the business being conducted by Sellers
in conjunction with Tony Goolsby pursuant to the Onyx Agreement.
Onyx Receivables: the accounts receivable and other
payments owing to either Seller by Tony Goolsby (or any of his
Affiliates) and/or the Onyx Business, aggregating approximately
$1,350,000 as of the Cut-off Date, and constituting part of the
assets to be retained by Sellers as part of the Excluded Assets.
Open Box Items: shall mean all items of Inventory
(other than Spare Parts) which are incomplete, damaged, the
packing material of which has been damaged, scratched or opened,
or any product which has been returned to either Seller by a
purchaser, as determined by Vanstar and Buyer promptly following
the Closing, as provided in Section 2.3.
Owned Intellectual Property: as defined in Section
3.1.19(a).
Permitted Liens: Liens reserved against in the Cut-off
Date Balance Sheet, to the extent so reserved and to the extent
relating exclusively to the Assumed Liabilities, or as otherwise
set forth on Schedule 3.1.11.
Person: any natural person, firm, partnership,
association, corporation, company, limited liability company,
limited partnership, trust, business trust, Governmental
Authority or other entity.
Rejected Inventory: shall mean items of Inventory
(other than Spare Parts) classified as Discontinued With No
Demand and Open Box Items.
Rejected Spare Parts: shall mean any Spare Parts other
than Accepted Spare Parts.
Release: any releasing, disposing, discharging,
injecting, spilling, leaking, leaching, pumping, dumping,
emitting, escaping, emptying, seeping, dispersal, migration,
transporting, placing and the like, including without limitation,
the moving of any materials through, into or upon, any land,
soil, surface water, ground water or air, or otherwise entering
into the environment.
Remedial Action: all actions required to (i) clean up,
remove, treat or in any other way remediate any Hazardous
Substances; (ii) prevent the release of Hazardous Substances so
that they do not migrate or endanger or threaten to endanger
public health or welfare or the environment; or (iii) perform
studies, investigations and care related to any such Hazardous
Substances.
Security: as defined in Section 3.1.30.
Securities Acts: as defined in Section 8.2.
Sellers: as defined in the preamble of this Agreement.
Sellers' Accountants: Price Waterhouse LLP
Seller Indemnitees: as defined in Section 9.3.
Spare Parts: as defined in Section 1.1.
Statement of Net Assets Sold: as defined in Section
3.1.4.
Stay Bonus: as defined in Section 6.1(e).
Subsidiaries: each corporation or other Person in
which a Person owns or controls, directly or indirectly, capital
stock or other equity interests representing at least 50% of the
outstanding voting stock or other equity interests or conferring
the power to name a majority of the members of the Board of
Directors or other governing body or otherwise direct the
management or policies thereof.
Tangible Net Worth: means, with regard to any
determination thereof, total assets (excluding intangible assets)
less total liabilities of the Business, other than the IBM
Liabilities, determined in accordance with GAAP.
Tax: any federal, state, provincial, local, foreign or
other income, alternative, minimum, accumulated earnings,
personal holding company, franchise, capital stock, net worth,
capital, profits, windfall profits, gross receipts, value added,
sales, use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary,
recording, premium, severance, environmental (including taxes
under Section 59A of the Code), real property, personal property,
ad valorem, intangibles, rent, occupancy, license, occupational,
employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care, withholding,
estimated or other similar tax, duty or other governmental charge
or assessment or deficiencies thereof (including all interest and
penalties thereon and additions thereto whether disputed or not).
Tax Return: any return, report, declaration, form,
claim for refund or information return or statement relating to
Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
Transaction Expenses: as defined in Section 10.1.
Transferred Employees: as defined in Section 6.1(b).
Transfer Taxes: as defined in Section 4.1.7.
Transition Employees: as defined in Section 6.1(c).
Transition Period: as defined in Section 6.1(c).
Uncollected Accounts Receivable: shall mean all
Accounts Receivable (other than Vendor Receivables) remaining
uncollected which Vanstar and Buyer, after consultation with
Sellers, designate as uncollectible and subject to Section
2.5(b).
Uncollected Vendor Receivables: shall mean all Vendor
Receivables remaining uncollected which Vanstar and Buyer, after
consultation with Sellers, designate as uncollectible and subject
to Section 2.5(c).
Valtron Business: the assets and liabilities relating
solely to the business of Sellers commonly known as the "Valtron"
business and being more specifically described in Schedule 1.2
hereof.
Valtron Receivables: the accounts receivable and other
amounts owing to either of the Sellers with respect to the
Valtron Business, aggregating approximately $1,900,000 on the
Cut-off Date and constituting part of the Valtron Business to be
retained by Sellers as part of the Excluded Assets.
Vanstar: as defined in the Preamble of this Agreement.
Vanstar Claims: as defined in Section 2.6.
Valuation: as defined in Section 2.4.
Vendor Receivables: as defined in Section 1.1.
VR Adjustment Amount: as defined in Section 2.5(c).
Withholding Taxes: as defined in Section 3.1.6(a).
ARTICLE II THE CLOSING
2.1 Place and Date. The closing of the sale and purchase
of the Assets (the "Closing") shall take place at 10:00 A.M.
local time on the 24th day of May, 1996 at the offices of Arter &
Hadden in Dallas, Texas, or at such other time and place as the
parties may agree. The Closing shall be deemed effective as of
11:59 p.m., Friday, May 24, 1996. The day on which the Closing
actually occurs is herein sometimes referred to as the "Closing
Date."
2.2 Purchase Price. On the terms and subject to the
conditions set forth in this Agreement, Buyer agrees to assume
and timely discharge the Assumed Liabilities as provided in
Section 2.9 and to pay to or on behalf of Sellers the amounts set
forth in this Section 2.2.
2.2.1 Closing Date Payment. On the Closing Date,
Vanstar and Buyer shall pay to or on behalf of Sellers an amount
(the "Closing Date Payment") equal to $5,000,000 plus the
Tangible Net Worth of the Business as of the Cut-off Date, for a
total Closing Date Payment of $36,901,750.
2.2.2 Certain Additional Potential Payments.
Following the Closing Date, Vanstar and Buyer shall make the
payments to Sellers, if any, that may be required by the
provisions contained in Section 2.5 and 2.6.
2.2.3 Payment to IBM Credit. Sellers hereby
irrevocably authorize and instruct Vanstar and Buyer to pay the
entire Closing Date Payment and any payments due Sellers pursuant
to the Escrow Agreement or Section 2.5 or 2.6 directly to IBM
Credit (and Sellers acknowledge and agree that such payment to
IBM Credit shall be deemed to constitute full performance by
Vanstar and Buyer of their obligations to make the Closing Date
Payment and any payments due Sellers pursuant to the Escrow
Agreement or Section 2.5 or 2.6 to Sellers hereunder or pursuant
hereto for all purposes), with instructions to apply same to
Sellers' account with IBM Credit. Although the parties have
agreed as to the payment of certain cash to IBM Credit, it is not
the intent of the parties to make IBM Credit a third party
beneficiary of this Agreement or to confer any benefit under this
Agreement to IBM Credit. Without limiting the generality of the
foregoing, neither Vanstar nor Buyer assumes any obligations to
IBM Credit arising from this Agreement or any indebtedness of
either Seller to IBM Credit and no notice to or consent of IBM
Credit shall be required for any modification, amendment or
termination of this Agreement.
2.3 Designation of Inventory Components. Promptly
following the Closing, Vanstar, Buyer and Sellers shall complete
a review of the Inventory (including Spare Parts) constituting a
part of the Assets and Vanstar and Buyer shall designate each
item or group of items as:
(a) With regard to Inventory (other than Spare
Parts), either (1) Available for Sale, (2) Discontinued with
Current Orders, (3) Open Box Items or (4) Discontinued with No
Demand; and
(b) With regard to Spare Parts, either (1)
Accepted Spare Parts or (2) Rejected Spare Parts.
2.4 Valuation of Asset Components. For the purposes of
this Article II, Buyer shall, at the time or times required
herein, obtain a valuation (the "Valuation") of one or more
components of the Assets. With regard to any such Valuation, at
the times required in this Article II, Buyer shall first attempt
to reach an agreement with Sellers with respect thereto and
failing such agreement shall either (i) secure an offer to
purchase the applicable Asset from a Person other than an
Affiliate of Vanstar, Buyer or either Seller or (ii) cause a
Person having experience in valuing the property or rights who is
not an Affiliate of Vanstar, Buyer or either Seller to be so
valued to render an opinion regarding the fair market value of
such property or right, assuming an orderly liquidation in bulk,
without warranty other than as to title thereof, and without
giving any consideration or value to good will associated with
the Business or any value which might be the result of the
combination of such property or rights with any other property or
rights. The Valuation shall assign a dollar value to the rights
or property in question and shall be in writing. Any Person
rendering a Valuation shall be required to exercise ordinary care
in doing so, but shall otherwise have no liability to Vanstar,
Buyer or either Seller and none of Vanstar, Buyer or either of
the Sellers shall make any claim against any such Person arising
from this Agreement or any Valuation obtained hereunder.
2.5 Effect of Valuations, Return of Certain Assets.
(a) Not later than forty-five (45) days following
the Closing Date, Buyer shall obtain and provide Sellers with
prompt notice of a Valuation (as of the date made) of each of the
Inventory and the Spare Parts designated by Buyer as Rejected
Inventory and Rejected Spare Parts, together with a computation
of the Inventory Difference. The "Inventory Difference" shall be
the difference, between the aggregate Net Value of the Rejected
Inventory and Rejected Spare Parts as of the Determination Date
and the aggregate of the Valuations thereof.
Not later than ten (10) days following receipt of the
notice called for in the first sentence of this Section 2.5(a),
Sellers shall notify Vanstar and Buyer of their election to
either (i) pay Buyer in cash an amount equal to the Net Value as
of the Determination Date of the Rejected Inventory and the
Rejected Spare Parts and receive a conveyance of the Rejected
Inventory and the Rejected Spare Parts or (ii) pay Buyer in cash
an amount equal to the Inventory Difference (and Buyer shall
retain the Rejected Inventory and Rejected Spare Parts). To the
extent that Section 2.5(e) shall not have otherwise required
allocation thereof, Sellers may apply amounts to become due them
from Vanstar and Buyer thereunder to Sellers' obligations under
this Section 2.5(a). Failure by Sellers to so notify Vanstar and
Buyer of their election shall constitute an election to pay an
amount equal to the Inventory Difference and apply amounts due
under Section 2.5(e), to the extent available in partial
satisfaction of such payment obligation. Any cash received by
Buyer with respect to Rejected Inventory or Rejected Spare Parts
following the date of the Valuation thereof and prior to
consummation of the transaction contemplated in this subsection
shall be held by Buyer for the benefit of (or credit to) the
party entitled to receive or retain the Rejected Inventory and
Rejected Spare Parts in accordance with this Section 2.5(a).
(b) Not later than ninety (90) days after the
Closing Date, Buyer shall obtain and provide Sellers with prompt
notice of a Valuation (as of the date made) of each of the
Accounts Receivable designated by Buyer as an Uncollected Account
Receivable together with a computation of the AR Adjustment
Amount with respect thereto. The "AR Adjustment Amount" shall be
the difference, between the Net Value of the Uncollected Accounts
Receivable as of the Determination Date and the Valuation
thereof. If the aggregate Net Value of the Uncollected Accounts
Receivable as of the Determination Date is less than the
aggregate Valuations thereof, Vanstar and Buyer shall, within ten
(10) days following the notice called for in the preceding
sentence, pay cash in an amount equal to the AR Adjustment Amount
to Sellers and Buyer shall retain the Uncollected Accounts
Receivable. If the aggregate Net Value of the Uncollected
Accounts Receivable as of the Determination Date is more than the
aggregate Valuation thereof, then, in such event, not later than
ten (10) days after receiving the notice called for in the first
sentence of this Section 2.5(b), Sellers shall notify Vanstar and
Buyer of their election to (i) pay Buyer in cash an amount equal
to the Net Value as of the Determination Date of the Uncollected
Accounts Receivable and receive from Buyer an assignment of the
Uncollected Accounts Receivable, free and clear of any liens,
claims or encumbrances resulting solely from the actions of
Vanstar or Buyer or (ii) pay Buyer in cash an amount equal to the
AR Adjustment Amount (and Buyer shall retain the Uncollected
Accounts Receivables). To the extent that Section 2.5(e) shall
not have otherwise required allocation thereof, Sellers may apply
amounts to become due them from Vanstar and Buyer thereunder to
Sellers' obligations under this Section 2.5(b). Failure by
Sellers to so notify Vanstar and Buyer of their election shall
constitute an election to pay the AR Adjustment Amount and apply
amounts due under Section 2.5(e), to the extent available, in
partial satisfaction of such payment obligations. Any cash
payment received by Buyer with respect to any Uncollected
Accounts Receivable following the date of the Valuation thereof
and prior to consummation of the transaction contemplated in this
subsection shall be held by Buyer for the benefit of (or credit
to) the party entitled to receive or retain such Uncollected
Account Receivable in accordance with this Section 2.5(b).
(c) Not later than one hundred fifty (150) days
following the Closing Date, Buyer shall obtain and provide
Sellers with prompt notice of a Valuation (as of the date made)
of each of the Vendor Receivables designated by Buyer as an
Uncollected Vendor Receivable together with a computation of the
VR Adjustment Amount. The "VR Adjustment Amount" shall be the
difference, if it is a positive number, between the Net Value of
the Uncollected Vendor Receivables as of the Determination Date
and the Valuation thereof. If the aggregate Net Value of the
Uncollected Vendor Receivables as of the Determination Date is
less than the aggregate Valuations thereof, Vanstar and Buyer
shall, within ten (10) days following the notice called for in
the preceding sentence, pay cash in an amount equal to the VR
Adjustment Amount to Sellers and Buyer shall retain the
Uncollected Vendor Receivables. If the aggregate Net Value of
the Uncollected Vendor Receivables on the Determination Date is
more than the aggregate Valuation thereof, then, in such event,
not later than ten (10) days after receiving the notice called
for in the first sentence of this Section 2.5(c), Sellers shall
notify Vanstar and Buyer of their election to (i) pay Buyer in
cash an amount equal to the Net Value as of the Determination
Date of the Uncollected Vendor Receivables and receive from Buyer
an assignment of the Uncollected Vendor Receivables, free and
clear of any liens, claims or encumbrances resulting solely from
the actions of Vanstar or Buyer or (ii) pay Buyer in cash an
amount equal to the VR Adjustment Amount (and Buyer shall retain
the Uncollected Vendor Receivables). To the extent that Section
2.5(e) shall not have otherwise required allocation thereof,
Sellers may apply amounts to become due them from Vanstar and
Buyer thereunder to Sellers' obligations under this Section
2.5(c). Failure by Sellers to so notify Vanstar and Buyer of
their election shall constitute an election to pay the VR
Adjustment Amount and apply amounts due under Section 2.5(e), to
the extent available in partial satisfaction of such payment
allocation. Any cash payment received by Buyer with respect to
any Uncollected Vendor Receivable following the date of the
Valuation thereof and prior to consummation of the transaction
contemplated in this subsection shall be held by Buyer for the
benefit of (or credit to) the party entitled to receive or retain
such Uncollected Vendor Receivable in accordance with this
Section 2.5(c).
(d) Within sixty (60) days following the Closing
Date, Sellers' Accountants shall furnish Buyer, Vanstar and
Sellers with a report (the "Net Worth Report"), which shall set
forth, in reasonable detail, the Tangible Net Worth of the
Business on the Determination Date. In making such
determination, Sellers' shall prepare a balance sheet for the
Assets and the Assumed Liabilities as of the Determination Date
audited by Sellers' Accountants and shall include such audited
balance sheet, and their report thereon, as part of the Net Worth
Report. The Net Worth Report shall indicate the procedures
employed by Sellers' Accountants in preparing the Net Worth
Report and shall contain such other financial information and
methods of calculation as may be reasonably necessary for Sellers
to evaluate the accuracy thereof. Vanstar and Buyer shall have a
period of ten (10) days after receipt of the Net Worth Report to
notify Sellers of their election to accept or reject (and in the
case of a rejection, there shall be included in such notice the
reasons for such rejection in reasonable detail) the Net Worth
Report. In the event no notice is received by Sellers during
such ten (10) day period, the Net Worth Report and any required
adjustments resulting therefrom shall be deemed accepted by
Vanstar and Buyer. In the event Vanstar and Buyer shall timely
reject the Net Worth Report, Sellers' Accountants and Buyers'
Accountants shall promptly (and in any event within thirty (30)
days following the date upon which Sellers shall reject the Net
Worth Report), attempt to make a joint determination of the
Tangible Net Worth of the Business on the Determination Date and
such determination and any required adjustments resulting
therefrom shall be final and binding on the parties hereto. In
the event Sellers' Accountants and Buyers' Accountants shall be
unable to agree upon the required Tangible Net Worth
determination as herein provided, within 120 days from the
Closing Date, such determination shall be made by KPMG Peat
Marwick at or prior to the expiration of 150 days from the
Closing Date and such determination and any required adjustments
resulting therefrom shall be final and binding on all the parties
hereto. In making the calculation of the Tangible Net Worth of
the Business on the Determination Date, as herein contemplated,
calculations shall be made in such a manner as to give effect to,
and so as to not create an additional deduction from or addition
to the Assets for the adjustments being made under Sections
2.5(a), (b) and (c) above and shall properly reflect the costs to
Vanstar and Buyer with respect to the Transferred Employees and
Transition Employees and similar expenses for the period between
the Closing and the Determination Date which would otherwise have
been borne by Sellers during such period and shall reflect, as a
liability, any portion of the IBM Liabilities assumed by Vanstar
or Buyer pursuant to Section 2.9(i)(F) hereof. If the Tangible
Net Worth of the Business on the Cut-off Date shall exceed the
Tangible Net Worth of the Business on the Determination Date, the
amount of such difference, if any, as finally determined in
accordance with the provisions of this Section 2.5(d), shall
represent a Loss to Vanstar and Buyer hereunder and shall be
payable by Sellers to Vanstar and Buyer as an adjustment to the
purchase price. If the Tangible Net Worth of the Business on
the Determination Date shall exceed the Tangible Net Worth on the
Cut-off Date, an amount equal to the amount of such difference,
if any, as finally determined in accordance with this Section
2.5(d) shall be paid by Vanstar and Buyer as an adjustment to the
purchase price. Payment of any amounts due Vanstar and Buyer or
Sellers with respect to the differences in the Tangible Net Worth
of the Business on the Cut-off Date and the Tangible Net Worth of
the Business on the Determination Date, as determined hereunder,
shall be made within ten (10) days of Vanstar's and Buyer's
acceptance of the Net Worth Report.
(e) Subject to any claims Vanstar and Buyer may
have as of such date under Section 9.1 with respect to Losses in
excess of $3,000,000 in the aggregate, and subject to any
application by Sellers first under Section 2.5(a) and then under
Section 2.5(b) and (c), in that order, Sellers shall be entitled
to an additional cash payment or credit, as the case may be,
equal to $2,000,000, which shall be payable or credited by Buyer,
as the case may be, from the amounts under the Escrow Agreement
at the time the adjustments, if any, required by Section 2.5(d)
are made.
(f) Any payments required to be made by Sellers
hereunder may at the election of Sellers under this Section 2.5
be treated as reductions of the Indemnity Basket in accordance
with Section 2.7 hereof up to the total amount of such
entitlement ($600,000). To the extent any such reductions are
made and Losses or any other amounts for which Vanstar and Buyer
are owed indemnity under Article IX, together with any other
credits or adjustments to which Vanstar or Buyer shall be
entitled hereunder, shall exceed the amount remaining in the
Indemnity Basket, Sellers shall immediately upon demand reimburse
Vanstar and Buyer therefor.
2.6 Escrow Agreement. Subject to Sellers' obligations to
pay amounts to Vanstar and Buyer pursuant to Sections 2.5 and 9.1
hereof, Buyer and Vanstar have agreed to pay, as part of the
purchase price, an amount equal to (i) $5,000,000 (which shall
include the amount called for in Section 2.5(e) above), plus (ii)
interest at an annual rate equal to seven and three quarters
percent (7-3/4%) from the date hereof until delivered into
escrow. In connection therewith, no later than the seventh (7th)
day following the Closing, Sellers, on the one hand, and Buyer
and Vanstar, on the other, will enter into an Escrow Agreement
with U.S. Trust of Texas, N.A. or with such other Person as the
parties may agree (the "Escrow Agent") in form and substance
reasonably satisfactory to each of the parties thereto, providing
for the deposit with the Escrow Agent of the sum of $5,000,000
(together with the interest called for in the preceding sentence)
and payment by the Escrow Agent as follows:
(i) subject to any Vanstar Claims in excess of
$3,000,000 plus amounts owed by Sellers under Section 2.5, if
any, $2,000,000 will be paid to Sellers on the first to occur of
the delivery of a joint written notice from Vanstar and Dataflex
or the tenth day following the delivery and acceptance by the
parties pursuant to Section 2.5(d) of the Net Worth Report; and
(ii) on the first day following the passage of six
(6) complete calendar months from the Closing Date, the
difference between (A) $3,000,000 and (B) the sum of $1,000,000
and all Vanstar Claims; and
(iii) on the first business day following the
passage of twelve (12) complete calendar months from the Closing
Date, the difference between (x) $3,000,000 and (y) the sum of
$500,000 and all Vanstar Claims; and
(iv) on the first business day following the
passage of twenty-four (24) calendar months from the Closing Date
any amount then held by the Escrow Agent in excess of Vanstar
Claims; and
(v) thereafter, from time to time, any amount
held by the Escrow Agent in excess of the Vanstar Claims.
For the purposes of this Section 2.6, Vanstar and Buyer shall be
permitted to make claims to the Escrow Agent for amounts due them
from Sellers, or either of them, pursuant to Sections 2.5 or 9.1
and such amounts shall be deemed "Vanstar Claims". The Escrow
Agreement will provide that to the extent that any amount due
Vanstar and Buyer hereunder shall become fixed or determinable as
to amount or shall be finally determined, either in accordance
with the provisions of this Agreement, by mutual agreement of
Vanstar and Dataflex, by reason of any final judgment or
non-appealable order of any arbitrator or similar authority, the
Escrow Agent shall pay cash in the amount of such claim to
Vanstar and Buyer. The Escrow Agreement shall take into account
the provisions of Section 2.7 hereof. In addition, the Escrow
Agreement shall provide that all payments otherwise due to
Sellers shall be paid directly to IBM Credit and not to Sellers
or their assigns.
2.7 Arrangements Related to the Indemnity Basket. The
parties have agreed to share equally certain losses and costs
with the result that Sellers shall be entitled to receive a
maximum benefit of $600,000 (the "Indemnity Basket"). Sellers
shall be entitled to apply, from time to time, any then remaining
portion of the Indemnity Basket to satisfy liabilities to Vanstar
and Buyer under Section 2.5 and Section 9.1. The Indemnity
Basket shall be reduced by an amount equal to one-half of any
Losses (including, without limitation, Losses in the amount of
the Inventory Difference, the AR Adjustment Amount and VR
Adjustment Amount) which Sellers elect to apply to the Indemnity
Basket, and any amounts resulting from the application of the
provisions of Section 2.5(d) hereof. In no event shall the
Indemnity Basket be reduced below zero or be increased by
amounts, if any, due Sellers by Vanstar or Buyer. Sellers shall
be fully liable for all amounts owed Vanstar and Buyer under this
Agreement in excess of the Indemnity Basket.
<PAGE>
Allocation of Purchase Price.
(a) The purchase price for the Assets shall be
allocated within 60 days of the Closing (or as soon as
practicable thereunder) among the Assets in accordance with an
allocation schedule to be prepared by Buyer and consented to by
Sellers, which consent will not be unreasonably withheld. Such
allocation schedule shall be prepared in accordance with section
1060 of the Code.
(b) In connection with the determination of the
schedule contemplated in Section 2.8(a) above, the parties shall
cooperate with each other and provide such information as any of
them shall reasonably request. The parties will each report the
federal, state and local and other Tax consequences of the
purchase and sale contemplated hereby (including the filing of
Internal Revenue Service Form 8594) in a manner consistent with
such allocation schedule.
2.9 Assumption of Liabilities.
(a) Subject to the terms and conditions set forth
herein, at the Closing, Buyer shall assume and agree to pay,
honor and discharge when due, all of the following liabilities
relating to the Assets and existing at or arising on or after the
Closing Date (collectively, the "Assumed Liabilities"):
(i) any and all liabilities, obligations and
commitments relating exclusively to the Business or the Assets
that are (y) reflected on the Cut-off Date Balance Sheet or (z)
incurred after the date of the Cut-off Date Balance Sheet in the
ordinary course of business consistent with prior practice and in
accordance with the terms of this Agreement, except, in each
case, (A) liabilities related to product liability claims, (B)
Environmental Liabilities and Costs, (C) liabilities for Taxes,
(D) liabilities in respect of employees or Employee Benefit
Plans, except to the extent specifically assumed by Buyer
pursuant to Article VI, and (E) accounts or amounts payable to
officers, directors, employees or Affiliates of either Seller
which do not represent trade accounts payable or compensation due
in the ordinary course and not delinquent, in each case reflected
in the Cut-off Date Balance Sheet, (F) the IBM Liabilities
(except any portion thereof which Vanstar or Buyer shall elect,
in their sole discretion after the date hereof, to assume, in
which event any such portion so assumed shall be a liability of
Sellers for the purposes of preparing the Net Worth Report) and
(G) to the extent that all such Assumed Liabilities exceed in the
aggregate an amount equal to the Maximum Liability;
(ii) any and all liabilities, obligations and
commitments (x) arising out of the agreements, contracts and
commitments set forth on Schedule 3.1.12(a) and designated
therein as "Assumed" (or not required to be set forth therein
because of the amount involved), but not including any obligation
or liability for any amount owed with respect to or arising as a
result of a breach thereof occurring prior to the Closing Date or
(y) listed on Schedule 2.9(a)(ii); and
(iii) liabilities in respect of Transferred
Employees to the extent specifically assumed by Buyer pursuant to
Article VI or Article IX.
(b) At the Closing, Buyer shall assume and agree to
discharge the Assumed Liabilities relating to the Business, up to
the Maximum Liability, by executing and delivering to Sellers an
assumption agreement substantially in the form of Exhibit B
attached hereto (the "Assumption Agreement").
2.10 Excluded Liabilities. Notwithstanding the provisions
of Section 2.9 or any other provision hereof or any schedule or
exhibit hereto and regardless of any disclosure to Vanstar or
Buyer, neither Vanstar nor Buyer nor any of their Affiliates
shall assume any liabilities, obligations or commitments
(collectively, the "Excluded Liabilities") of Sellers, or any
other Person which in any way relate to or arise out of the
Valtron Business or the Onyx Business, the IBM Liabilities (other
than any portion thereof assumed by Buyer or Vanstar pursuant to
Section 2.9(i)(F) hereof), or which in any relates to or arises
out of the operation of the Business or the ownership of the
Assets during any period prior to the Closing Date other than the
those obligations and commitments comprising the Assumed
Liabilities.
2.11 Consent of Third Parties. Notwithstanding anything to
the contrary in this Agreement, this Agreement shall not
constitute an agreement to assign or transfer any Governmental
Approval, instrument, contract, lease, permit or other agreement
or arrangement or any claim, right or benefit arising thereunder
or resulting therefrom if an assignment or transfer or an attempt
to make such an assignment or transfer without the consent of a
third party would constitute a breach or violation thereof or
affect adversely the rights of Vanstar, Buyer or either Seller
thereunder; and any transfer or assignment to Buyer by either
Seller of any interest under any such instrument, contract,
lease, permit or other agreement or arrangement that requires the
consent of a third party shall be made subject to such consent or
approval being obtained. In the event any such consent or
approval is not obtained on or prior to the Closing Date, unless
the parties hereto shall otherwise agree, Sellers shall continue
to use all reasonable efforts to obtain any such approval or
consent after the Closing Date until such time as such consent or
approval has been obtained, and Sellers will cooperate with
Vanstar and Buyer in any lawful and economically feasible
arrangement to provide that Buyer shall receive the interests of
Sellers in the benefits under any such instrument, contract,
lease or permit or other agreement or arrangement, including
performance by Sellers, as agent, if economically feasible;
provided that Buyer shall undertake to pay or satisfy the
corresponding liabilities for the enjoyment of such benefit to
the extent Buyer would have been responsible therefor hereunder
if such consent or approval had been obtained. Sellers shall pay
and discharge, and shall indemnify and hold Vanstar, Buyer and
their Affiliates harmless from and against, any and all
out-of-pocket costs of seeking to obtain or obtaining any such
consent or approval whether before or after the Closing Date.
Nothing in this Section 2.11 shall be deemed a waiver by Buyer of
its rights to have received on or before the Closing an effective
assignment of all of the Assets nor shall this Section 2.11 be
deemed to constitute an agreement to exclude from the Assets any
assets described under Section 1.1.
2.12 Intellectual Property Licenses.
(a) Vanstar and Buyer, effective as of the Closing,
grant Dataflex a fully paid, perpetual license to utilize and
exploit certain computer software written in Hypertext Markup
Language or any other programming language (the "Website
Software") (which is utilized in the presentation, maintenance
and operation of the Dataflex "website" on the so called "World
Wide Web" and to make one or more copies thereof and
modifications and enhancements thereto. The license granted
Dataflex herein shall be limited to use of the Website Software
in connection with Dataflex business operations, and shall not
include the right to grant sublicenses. No warranty of title,
fitness for a particular purpose or any warranty regarding the
absence of infringement on the rights of third parties is made
hereby by Vanstar or Buyer, nor shall any be implied. The
license granted hereby may be transferred by Dataflex in
connection with any sale or transfer of all or any substantial
portion of its assets but not otherwise. Vanstar and Buyer shall
have no obligation to provide any support, modifications or
enhancements to Dataflex or any transferee in connection with the
Website Software.
(b) Dataflex and DSC hereby grant Vanstar and Buyer a
fully paid, perpetual license to utilize any copyright or other
proprietary interest in the graphical presentation methodology
and the "look and feel" of the Flex Direct Catalog owned or
otherwise held by Dataflex or DSC. No warranty of title, fitness
for a particular purpose or any warranty regarding the absence of
infringement on the rights of third parties is made hereby by
Vanstar or Buyer, nor shall any be implied.
ARTICLE III REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Sellers. Dataflex
and DSC, jointly and severally, represent and warrant to Vanstar
and Buyer as follows:
3.1.1 Authorization, etc.Each of Dataflex and DSC
hasthe corporate power and authority to execute and deliver this
Agreement and each of the Collateral Agreements to which it will
be a party, to perform fully its obligations hereunder and
thereunder, and to consummate the transactions contemplated
hereby and thereby. The execution and delivery by each of
Dataflex and DSC of this Agreement, and the consummation of the
transactions contemplated hereby, have been, and the execution
and delivery of the Collateral Agreements to which it will be a
party and the consummation of the transactions contemplated
thereby will have been, duly authorized by all requisite
corporate action of Dataflex and DSC. Each of Dataflex and DSC
has duly executed and delivered this Agreement and on the Closing
Date each will have duly executed and delivered each of the
Collateral Agreements to which it is a party. This Agreement is,
and on the Closing Date each of the Collateral Agreements to
which either Dataflex or DSC is a party will be, legal, valid and
binding obligations of Dataflex or DSC, as the case may be,
enforceable against Dataflex or DSC, as the case may be in
accordance with their respective terms subject to bankruptcy,
insolvency, reorganization, fraudulent transfer and conveyance,
receivership, moratorium and similar laws affecting creditors
rights generally.
3.1.2 Corporate Status.
(a) Each of Dataflex and DSC is a corporation
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with full
corporate power and authority to carry on its business and to own
or lease and to operate its properties as and in the places where
such business is conducted and such properties are owned, leased
or operated.
(b) Each of Dataflex and DSC is duly qualified
or licensed to do business and is in good standing in each of the
jurisdictions specified in Schedule 3.1.2(b), which are the only
jurisdictions in which the operation of the Business or the
character of the properties owned, leased or operated by it in
connection with the Business makes such qualification or
licensing necessary.
(c) Each of Dataflex and DSC has delivered to
Buyer complete and correct copies of its certificate of
incorporation and bylaws or other organizational documents, in
each case, as amended and in effect on the date hereof. Neither
Dataflex nor DSC is in violation of any of the provisions of its
certificate of incorporation or bylaws or any other
organizational documents.
(d) All the issued and outstanding shares of
capital stock of DSC are owned of record and beneficially by
Dataflex with no other party owning any rights in or with respect
thereto.
3.1.3 No Conflicts, etc. The execution, delivery and
performance by each of Dataflex and DSC of this Agreement and
each of the Collateral Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby,
do not and will not conflict with or result in a violation of or
a default under (with or without the giving of notice or the
lapse of time or both) (i) any Applicable Law applicable to
either Seller, or any Affiliate of either Seller or any of the
properties or assets of either Seller (including but not limited
to the Assets), (ii) the certificate of incorporation or bylaws
or other organizational documents of either Seller or (iii)
except as set forth in Schedule 3.1.3, any Contract or other
contract, agreement or other instrument to which Dataflex or DSC
or any of their Affiliates is a party or by which either Seller
or any of their respective properties or assets, including but
not limited to the Assets, may be bound or affected. Except as
specified in Schedule 3.1.3, no Governmental Approval or other
consent is required to be obtained or made by either Seller in
connection with the execution and delivery of this Agreement or
the Collateral Agreements or the consummation of the transactions
contemplated hereby or thereby.
3.1.4 Financial Statements. Sellers have delivered to
Vanstar and Buyer (a) consolidated financial statements of
Dataflex and its subsidiaries as at and for the periods ended
March 31, 1994 and 1995 together with, in each case, a report
thereon by Sellers' Accountants and the unaudited, consolidated
financial statements of Dataflex and its subsidiaries as at March
31, 1996 (collectively, the "Annual Financial Statements") and
(b) an audited combined Statement of Net Assets Sold of the
Business as at and for the period ended March 31, 1996 together
with a report thereon by Sellers' Accountants (the "Business
Financial Statements"), including in each case a balance sheet,
and in each case except for the Business Financial Statements, a
statement of income and retained earnings and a statement of cash
flows (the Annual Financial Statements and the Business Financial
Statements are hereinafter collectively referred to as the
"Financial Statements"). The Financial Statements are complete
and correct in all material respects and have been prepared in
accordance with GAAP consistently applied throughout the periods
indicated. Except as set forth on Schedule 3.1.4, the Business
Financial Statements have been prepared on a basis consistent
with the Annual Financial Statements. Except as set forth on
Schedule 3.1.4, the balance sheet for the period ended March 31,
1996 included in the Business Financial Statements (the "Cut-off
Date Balance Sheet") does not include the Excluded Assets and
Excluded Liabilities or any other material assets or liabilities
(such as the Onyx Receivables and the Valtron Receivables and any
other assets or liabilities associated with the Valtron Business
or the Onyx Business) not intended to constitute a part of the
Business or the Assets, and presents fairly the financial
condition of the Business as of the Cut-off Date.
3.1.5 Absence of Undisclosed Liabilities. Neither
Seller has any liabilities or obligations of any nature, whether
known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due, arising out of or relating to the
Business, except (a) as set forth in Schedule 3.1.5, (b) as and
to the extent disclosed or reserved against in the Cut-off
Balance Sheet and (c) for liabilities and obligations that (i)
were incurred after the date of the Cut-off Balance Sheet in the
ordinary course of business consistent with prior practice and
(ii) individually and in the aggregate are not material to the
Business and have not had or resulted in, and will not have or
result in, a Material Adverse Effect. Except to the extent
specifically disclosed in Schedule 3.1.5, none of the employees
of the Business is now or will by the passage of time hereinafter
become entitled to receive any vacation time, vacation pay or
severance pay attributable to services rendered prior to such
date that is not reflected as an accrued liability on the Cut-off
Balance Sheet.
3.1.6 Taxes.
(a) Sellers have (or by the Closing will have)
duly and timely filed all Tax Returns relating to the Business
with respect to Taxes required to be filed on or before the
Closing Date ("Covered Returns"). Except for Taxes set forth on
Schedule 3.1.6(a), which are being contested in good faith and by
appropriate proceedings, the following Taxes ("Covered Taxes")
have (or by the Closing Date will have) been duly and timely
paid: (i) all Taxes shown to be due on the Covered Returns, (ii)
all deficiencies and assessments of Taxes of which notice has (or
by the Closing Date will have) been received by either Seller
that are or may become payable by Vanstar, Buyer or any of their
Affiliates or chargeable as a lien upon the Business, and (iii)
all other Taxes due and payable on or before the Closing Date for
which neither filing of Covered Returns nor notice of deficiency
or assessment is required, if Seller is or reasonably should be
(or by the Closing Date will be or reasonably should be) aware
that are or may become payable by Buyer or chargeable as a lien
upon the Business. All Taxes required to be withheld by or on
behalf of either Seller in connection with amounts paid or owing
to any employee, independent contractor, creditor or other party
with respect to the Business ("Withholding Taxes") have been
withheld, and such withheld taxes have either been duly and
timely paid to the proper Governmental Authorities or set aside
in accounts for such purpose.
(b) Except as set forth on Schedule 3.1.6(b), no
agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any Covered
Taxes or Withholding Taxes, and no power of attorney with respect
to any such Taxes, has been filed with the IRS or any other
Governmental Authority.
(c) Except as set forth on Schedule 3.1.6(c), (i)
there are no Covered Taxes or Withholding Taxes asserted in
writing by any Governmental Authority to be due and (ii) no issue
has been raised in writing by any Governmental Authority in the
course of any audit with respect to Covered Taxes or Withholding
Taxes. Except as set forth on Schedule 3.1.6(c), no Covered
Taxes and no Withholding Taxes are currently under audit by any
Governmental Authority. Except as set forth on Schedule
3.1.6(c), neither the IRS nor any other Governmental Authority is
now asserting or, to the best knowledge of Sellers, threatening
to assert against either Seller any deficiency or claim for
additional Covered Taxes or any adjustment of Covered Taxes that
would, if paid by Vanstar, Buyer or any of their Affiliates, have
a Material Adverse Effect, and there is no reasonable basis for
any such assertion of which either Seller is or reasonably should
be aware.
(d) Buyer shall not be required to deduct and
withhold any amount pursuant to section 1445(a) of the Code upon
the transfer of the Business to Buyer.
(e) Except as set forth on Schedule 3.16(e),
there is no litigation or administrative appeal pending or, to
the best knowledge of Sellers, threatened against or relating to
either Seller in connection with Covered Taxes.
3.1.7 Absence of Changes. Except as set forth in
Schedule 3.1.7, since the Cut-off Date, each Seller has conducted
the Business applicable to it only in the ordinary course
consistent with prior practice and has not, on behalf of, in
connection with or relating to the Business or the Assets:
(a) suffered or permit to have occurred any
Material Adverse Effect;
(b) incurred any obligation or liability,
absolute, accrued, contingent or otherwise, whether due or to
become due, except current liabilities for trade or business
obligations incurred in connection with the purchase of goods or
services in the ordinary course of business consistent with prior
practice, none of which liabilities, in any case or in the
aggregate, could have a Material Adverse Effect;
(c) discharged or satisfied any Lien other than
those then required to be discharged or satisfied, or paid any
obligation or liability, absolute, accrued, contingent or
otherwise, whether due or to become due, other than current
liabilities shown on the Cut-off Date Balance Sheet and current
liabilities incurred since the date thereof in the ordinary
course of business consistent with prior practice;
(d) mortgaged, pledged or subjected to Lien, any
property, business or assets, tangible or intangible, held in
connection with the Business;
(e) sold, transferred, leased to others or
otherwise disposed of any of the Assets, except for inventory
sold in the ordinary course of business, or cancelled or
compromised any debt or claim, or waived or released any right of
substantial value;
(f) received any notice of termination of any
contract, lease or other agreement or suffered any damage,
destruction or loss (whether or not covered by insurance) which,
in any case or in the aggregate, has had a Material Adverse
Effect;
(g) transferred or granted any rights under, or
entered into any settlement regarding the breach or infringement
of, any Intellectual Property Assets, or modified, failed to
preserve, lost or suffered any diminution of value of any
existing rights with respect thereto;
(h) made any material change in the rate of
compensation, commission, bonus or other direct or indirect
remuneration payable, or paid or agreed or orally promised to
pay, conditionally or otherwise, any bonus, incentive, retention
or other compensation, retirement, welfare, fringe or severance
benefit or vacation pay, to or in respect of any director,
officer, employee, salesman, distributor or agent of either
Seller;
(i) encountered any labor union organizing
activity, had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts, or had any material change in
its relations with its employees, agents, customers or suppliers;
(j) failed to replenish its Inventories in a
normal and customary manner consistent with its prior practice
and prudent business practices prevailing in the industry, or
made any purchase commitment in excess of the normal, ordinary
and usual requirements of its business or at any price in excess
of the then current market price or upon terms and conditions
more onerous than those usual and customary in the industry, or
made any change in its selling, pricing, advertising or
personnelpractices inconsistent with its prior practice and
prudent business practices prevailing in the industry;
(k) made any capital expenditures or capital
additions or improvements in excess of an aggregate of $50,000;
(l) instituted, settled or agreed to settle any
litigation, action or proceeding before any court or governmental
body other than in the ordinary course of business consistent
with past practices but not in any case involving amounts in
excess of $50,000;
(m) entered into any transaction, contract or
commitment other than in the ordinary course of business or paid
or agreed to pay any legal, accounting, brokerage, finder's fee,
Taxes or other expenses in connection with, or incurred any
severance pay obligations by reason of, this Agreement or the
transactions contemplated hereby;
(n) written up the carrying value of any of the
Assets;
(o) suffered any significant loss of employees,
customers or suppliers;
(p) entered into any material employment,
compensation, consulting or collateral bargaining agreement with
any Person or group, or modified or amended in any material
respect the terms of any such existing agreement;
(q) materially amended, modified or terminated,
or agreed to amend, modify or terminate, any existing material
contract, agreement, plan, lease, license, permit or franchise;
(r) to the best knowledge of Sellers, exercising
ordinary business prudence, taken any action or failed to take
any action, the result of which can reasonably be expected to be
a termination of or material default under any material contract,
agreement, plan, lease, license, permit or franchise;
(s) amended its certificate of incorporation,
bylaws or other constituent corporate documents, except as may be
necessary to facilitate the consummation of the transactions
contemplated in this Agreement; or
(t) made claims against any supplier or seller of
Inventories in excess of amounts reasonably due either Seller
with respect to defective goods or indemnity obligations of such
suppliers or sellers; or
(u) made any change or modification in Sellers'
accounting practices, policies or procedures which in any way
affect the Business, including any change or modification with
respect to the allocation of revenues, costs and expenses
applicable to the Business; or
(v) taken any action or omitted to take any
action that would result in the occurrence of any of the
foregoing.
3.1.8 Litigation. Except as set forth on Schedule
3.1.8, there is no action, claim, demand, suit, proceeding,
arbitration, grievance, citation, summons, subpoena, inquiry or
investigation of any nature, civil, criminal, regulatory or
otherwise, in law or in equity, pending or threatened against
either Seller in connection with the Assets or the Business or
against or relating to the transactions contemplated by this
Agreement, and neither Seller knows or has reason to be aware of
any basis for the same. Except as set forth in such Schedule
3.1.8, no citations, fines or penalties have been asserted
against either Seller under any Environmental Law or any foreign,
federal, state or local law relating to occupational health or
safety.
3.1.9 Compliance with Laws; Governmental Approvals and
Consents; Governmental Contracts.
(a) Except as disclosed in Schedule 3.1.9(a)
each Seller has, to the best knowledge of Sellers after
investigation, complied in all material respects with all
Applicable Laws applicable to or otherwise in any manner
affecting the Business or the Assets, and neither Seller has
received any notice alleging any such conflict, violation, breach
or default.
(b) Schedule 3.1.9(b) sets forth all Governmental
Approvals and other Consents necessary for, or otherwise material
to, the conduct of the Business.
Except as set forth in Schedule 3.1.9(b), all such
Governmental Approvals and Consents have been duly obtained and
are in full force and effect, and, to the best knowledge of
Sellers after investigation, each Seller is in compliance with
each of such Governmental Approvals and Consents held by it with
respect to the Assets and the Business.
(c) Schedule 3.1.9(c) sets forth all Contracts
with any Governmental Authority.
(d) Each Seller has filed with the proper
authorities all statements and reports required by the laws,
regulations, licensing requirements and orders to which it or any
of its employees (because of his or her activities on behalf of
his or her employer) is subject.
(e) To the best knowledge of Sellers, using
ordinary business prudence but without commissioning or
conducting a special investigation, there are no proposed laws,
rules, regulations, ordinances, orders, judgments, decrees,
governmental takings, condemnations or other proceedings which
would be applicable to the business, operations or properties of
or related to the Business and which might adversely affect the
properties, assets, liabilities, operations or prospects of the
Business, either before or after the Closing Date.
3.1.10 Operation of the Business. Except as set forth
in Schedule 3.1.10, the Business has been conducted only through
Dataflex and DSC and not through any direct or indirect
subsidiary or Affiliate of Dataflex or DSC.
3.1.11 Assets. Except as disclosed in Schedule
3.1.11, Sellers have good title to all the Assets free and clear
of any and all Liens. The Assets comprise all assets and
services used in the Business. The Assets, taken as a whole,
constitute all the properties and assets relating to or used or
held for use in connection with the Business during the past
twelve months (except Inventory sold, cash disposed of, accounts
receivable collected, prepaid expenses realized, Contracts fully
performed, properties or assets replaced by equivalent or
superior properties or assets, in each case in the ordinary
course of business, and the Excluded Assets). Except for
Excluded Assets, there are no assets or properties used in the
operation of the Business and owned by any Person other than
Sellers that will not be leased or licensed to Buyer under valid,
current leases or license arrangements. The Assets are in all
material respects adequate for the purposes for which such assets
are currently used or are held for use, and are in reasonably
good repair and operating condition (subject to normal wear and
tear) and, to the knowledge of Sellers, there are no facts or
conditions affecting the Assets which could, individually or in
the aggregate, interfere in any material respect with the use,
occupancy or operation thereof as currently used, occupied or
operated, or their adequacy for such use. At the Closing,
Sellers will convey to Buyer, good and marketable title to all of
the Assets, free and clear of all Liens, other than Permitted
Liens. Upon conveyance of the Assets to Buyer at the Closing,
Buyer shall acquire and hold good and marketable title to the
Assets, free and clear of all Liens except for Permitted Liens.
3.1.12 Contracts.
(a) Schedule 3.1.12(a) contains a complete and
correct description of all agreements, contracts, commitments and
other instruments and arrangements (whether written or oral) of
the types described below (x) by which any of the Assets are
bound or affected or under which either Seller or any of its
respective assets, businesses or operations receive benefits,
including, without limitation, the names and addresses of all
others who are parties thereto, or receive benefits thereunder,
or (y) to which either Seller is a party or by which either
Seller is bound in connection with the Business or the Assets
(the "Contracts"):
(i) leases, licenses, permits, franchises,
insurance policies, Governmental Approvals and other contracts
concerning or relating to the Leased Real Property;
(ii) employment, bonuses, vacations,
pensions, profit sharing, retirement, stock options, stock
purchases, employee discounts or other employee benefits,
consulting, agency, collective bargaining or other similar
contracts, agreements, and other instruments and arrangements
relating to or for the benefit of current, future or former
employees, officers, directors, sales representatives,
distributors, dealers, agents, independent contractors or
consultants;
(iii) loan agreements, indentures, letters of
credit, mortgages, security agreements, pledge agreements, deeds
of trust, bonds, notes, guarantees, and other agreements and
instruments relating to the borrowing of money or obtaining of or
extension of credit;
(iv) licenses, licensing arrangements and
other contracts providing in whole or in part for the use of, or
limiting the use of, any Intellectual property;
(v) brokerage or finder's agreements;
(vi) joint venture, partnership and similar
contracts involving a sharing of profits or expenses (including
but not limited to joint research and development and joint
marketing contracts);
(vii) asset purchase agreements and other
acquisition or divestiture agreements, including but not limited
to any agreements relating to the sale, lease or disposal of any
Assets (other than sales of Inventory in the ordinary course of
business) or involving continuing indemnity or other obligations;
(viii) orders and other contracts for the
purchase or sale of Inventories, materials, supplies, products or
services open or as to which any liability will exist as of the
Closing Date, each of which involves aggregate payments in excess
of $50,000;
(ix) contracts with respect to which the
aggregate amount that could reasonably expected to be paid or
received thereunder in the future exceeds $50,000;
(x) sales agency, manufacturer's
representative, marketing or distributorship agreements;
(xi) contracts, agreements or arrangements
with respect to the representation of the Business in foreign
countries;
(xii) master lease agreements providing for
the leasing of either (A) personal property primarily used in, or
held for use primarily in connection with, the Business and (B)
other personal property;
(xiii) contracts, agreements or commitments
with any director, officer, employee, or Affiliate of either
Seller, or with any holder of more than five percent (5%) of any
class of capital stock of Dataflex outstanding; and
(xiv) any other contracts, agreements or
commitments that are material to the Business.
(b) Sellers have delivered to Vanstar and Buyer
complete and correct copies of all written Contracts, together
with all amendments thereto, and accurate descriptions of all
material terms of all oral Contracts, set forth or required to be
set forth in Schedule 3.1.12(a).
All Contracts are in full force and effect and enforceable
against each party thereto. Neither Seller has received notice
of any plan or intention of any party to any Contract to exercise
any right to cancel or terminate any Contract. To the best
knowledge of Sellers after investigation, there does not exist
under any Contract any event of default or event or condition
that, after notice or lapse of time or both, would constitute a
violation, breach or event of default thereunder on the part of
either Seller or, to the best knowledge of Sellers after
investigation, any other party thereto, except as set forth in
Schedule 3.1.12(c) and except for such events or conditions that,
individually and in the aggregate, (i) has not had or resulted
in, and will not have or result in, a Material Adverse Effect and
(ii) has not and will not materially impair the ability of either
Seller to perform its obligations under this Agreement and under
the Collateral Agreements. Except as set forth in Schedule
3.1.12(c), no consent of any third party is required under any
Contract as a result of or in connection with, and the
enforceability of any Contract will not be affected in any manner
by, the execution, delivery and performance of this Agreement or
any of the Collateral Agreements or the consummation of the
transactions contemplated thereby.
(d) Neither Seller has outstanding any power
of attorney relating to the Business.
3.1.13 Territorial Restrictions. Except as described
in Schedule 3.1.13, neither Seller is restricted by any written
agreement or understanding with any other Person from carrying on
the Business anywhere in the world. Neither Vanstar, Buyer, nor
any of their Affiliates will, as a result of its purchase of the
Business from Sellers pursuant hereto and the assumption of the
Assumed Liabilities, become restricted in carrying on the
Business anywhere in the world as a result of any Contract or
other agreement to which either of the Sellers is a party or by
which either is bound.
3.1.14 Inventories. Except as specifically described
on Schedule 3.1.14 hereto, all Inventories reflected on the
Cut-off Date Balance Sheet consist of items of quality and
quantity which are useable or saleable in the ordinary course of
business of Sellers in the conduct of the Business and items of
below standard quality and items not useable or saleable in the
ordinary course of Sellers' business have been written down in
value in accordance with good business practices to estimated net
realizable market values or adequate reserves have been provided
therefor. The values at which the Inventories are carried on the
Cut-off Date Balance Sheet as at the Cut-off Date reflect the
normal valuation policy of Sellers in setting Inventory at the
lower of cost or net realizable market values, all in accordance
with GAAP. Except as set forth on Schedule 3.1.14, since the
Cut-off Date, Inventories have been maintained at normal and
adequate levels for the continuation of the Business in its
normal course, no change has occurred in such Inventories which
affect or will affect the useability or salability thereof, no
write-downs or write-ups of the value of such Inventories has
occurred and no additional amounts have been reserved with
respect to such Inventories. Schedule 3.1.14 lists the locations
of all Inventories together with a brief description of the type
and amount at each location.
3.1.15 Customers. Schedule 3.1.15 sets forth (a) the
names and addresses of all customers of each Seller that ordered
products, goods or services from either Seller with an aggregate
value for each such customer of $100,000 or more during the
twelve month period ended March 31, 1996 and which relate to the
Business and (b) the amount for which each such customer was
invoiced during such period. Neither Seller has received any
notice and neither Seller has any reason to believe that any
significant customer of either Seller (i) has ceased, or will
cease, to use the products, goods or services of either Seller
which relate to the Business, (ii) has substantially reduced, or
will substantially reduce, the use of products, goods or services
of either Seller which relate to the Business or (iii) has
sought, or is seeking, to reduce the price it will pay for
products, goods or services of either Seller, which relate to the
Business, including in each case after the consummation of the
transactions contemplated hereby. To the best knowledge of
Sellers, no customer of either Seller with respect to the
Business described in clause (a) of this section has otherwise
threatened to take any action described in the preceding sentence
as a result of the consummation of the transactions contemplated
by this Agreement and the Collateral Agreements.
3.1.16 Suppliers. Schedule 3.1.16 sets forth (a) the
names and addresses of all suppliers from which either Seller
ordered Inventories, and other products, goods and services with
an aggregate purchase price for each such supplier of $100,000 or
more during the twelve month period ended March 31, 1996 and
which relate to the Business and (b) the amount for which each
such supplier invoiced such Seller during such period. Neither
Seller has received any notice from any such supplier indicating
that there is or will be a material change in the price of such
items or services, and neither Seller has any reason to believe
that there will be any such material change in the price of such
items or services, or that any such supplier will not sell such
items to Buyer at any time after the Closing Date on terms and
conditions similar to those used in its current sales to such
Seller, subject to general and customary price increases. To the
best knowledge of Sellers, no supplier to either Seller described
in clause (a) of the first sentence of this section has otherwise
threatened to take any action described in the preceding sentence
as a result of the consummation of the transactions contemplated
by this Agreement or the Collateral Agreements.
3.1.17 Product Warranties. Except as set forth in
Schedule 3.1.17 and for warranties under Applicable Law, (a)
there are no warranties, express or implied, written or oral,
with respect to the products of the Business and (b) there are no
pending or threatened claims with respect to any such warranty,
and (c) neither Seller has, and to the best knowledge of Sellers,
neither Vanstar, Buyer nor any of their Affiliates will have, any
liability, after the Closing, with respect to any such warranty,
whether known or unknown, absolute, accrued, contingent or
otherwise and whether due or to become due.
3.1.18 Absence of Certain Business Practices. Neither
of the Sellers, nor any officer, employee or agent of either
Seller, or any other Person acting on their behalf, has, directly
or indirectly, within the past five years given or agreed to give
any gift, bribe, rebate or kickback or otherwise provided any
similar benefit to any customer, supplier, governmental employee
or other Person who is or may be in a position to help or hinder
Seller or the Business (or assist Seller in connection with any
actual or proposed transaction relating to the Business) (i)
which subjected or might have subjected Seller to any damage or
penalty in any civil, criminal or governmental litigation or
proceeding, (ii) which if not given in the past, might have had a
Material Adverse Effect, (iii) which if not continued in the
future, might have a Material Adverse Effect or subject Seller to
suit or penalty in any private or governmental litigation or
proceeding, (iv) for any of the purposes described in Section
162(c) of the Code or (v) for the purpose of establishing or
maintaining any concealed fund or concealed bank account.
3.1.19 Intellectual Property.
(a) Title. Schedule 3.1.19(a) contains a
complete and correct list and a brief description of all
Intellectual Property that is owned by either Seller and
primarily related to, used in, held for use in connection with,
or necessary for the conduct of, or otherwise material to the
Business (the "Owned Intellectual Property"). Sellers own or
have the exclusive right to use pursuant to license, sublicense,
agreement or permission all Intellectual Property Assets, free
from any Liens (other than Permitted Liens) and free from any
requirement of any past, present or future royalty payments,
license fees, charges or other payments, or conditions or
restrictions whatsoever. No Affiliate of either Seller owns or
has any interest in or with respect to any Intellectual Property
Asset and the Intellectual Property Assets comprise all of the
Intellectual Property necessary for Buyer to conduct and operate
the Business following the Closing as now being conducted by
Sellers.
(b) Transfer. Except as described on Schedule
3.1.19(b), immediately after the Closing, Buyer will have all of
Sellers' rights with respect to all of the Owned Intellectual
Property and will have a right to use all other Intellectual
Property Assets, free from any Liens (other than Permitted Liens)
and on the same terms and conditions as in effect prior to the
Closing.
(c) No Infringement. The conduct of the Business
does not infringe or otherwise conflict with any rights of any
Person in respect of any Intellectual Property. To the knowledge
of Sellers, after investigation, none of the Intellectual
Property Assets is being infringed or otherwise used or available
for use, by any other Person.
(d) Licensing Arrangements. Schedule 3.1.19(d)
sets forth all agreements, arrangements or laws (i) pursuant to
which either Seller has leased or licensed Intellectual Property
Assets, or the use of Intellectual Property Assets as otherwise
permitted (through non-assertion, settlement or similar
agreements or otherwise) by, any other Person and (ii) pursuant
to which either Seller has had Intellectual Property licensed to
it, or has otherwise been permitted to use Intellectual Property
(through non-assertion, settlement or similar agreements or
otherwise) together with a brief description of the Intellectual
Property Assets covered thereby. All of the agreements or
arrangements set forth on Schedule 3.1.19(d) (x) are in full
force and effect in accordance with their terms and no default
exists thereunder by either Seller, or to the knowledge of either
Seller, diligent investigation by any other party thereto, (y)
are free and clear of all Liens, and (z) do not contain any
change in control or other terms or conditions that will become
applicable or inapplicable as a result of the consummation of the
transactions contemplated by this Agreement. Sellers have
delivered to Vanstar and Buyer true and complete copies of all
licenses and arrangements (including amendments) set forth on
Schedule 3.1.19(d). All royalties, license fees, charges and
other amounts payable by, on behalf, to, or for the account of,
Sellers in respect of Intellectual Property are disclosed in the
Cut-off Date Balance Sheet.
a. No Intellectual Property Litigation. No
claim or demand of any Person has been made nor is there any
proceeding that is pending, or to the knowledge of either Seller,
after investigation, threatened, nor is there a reasonable basis
therefor, which (i) challenges the rights of either Seller in
respect of any of the Intellectual Property, (ii) asserts that
either Seller is infringing or otherwise in conflict with, or is,
except as set forth in Schedule 3.1.19(e), required to pay any
royalty, license fee, charge or other amount with regard to, any
Intellectual Property, or (iii) claims that any default exists
under any agreement or arrangement listed on Schedule 3.1.19(d).
None of the Intellectual Property Assets is subject to any
outstanding order, ruling, decree, judgment or stipulation by or
with any court, arbitrator, or administrative agency, or has been
the subject of any litigation within the last five years, whether
or not resolved in favor of either Seller.
b. Due Registration, etc. The Owned
Intellectual Property has been duly registered with, filed and/or
issued by, as the case may be, the United States Patent and
Trademark Office, United States Copyright Office or such other
filing offices, domestic or foreign, and each Seller has taken
such other actions, to ensure full protection under any
applicable laws and regulations, and such registrations, filings,
issuances and other actions remain in full force and effect, in
each case to the extent material to the Business.
c. Use of Name and Mark. Except as set forth
in Schedule 3.1.19(g), there are, and immediately after the
Closing will be, no contractual restrictions or limitations
pursuant to any order, decisions, injunctions, judgments, awards
or decrees of any Governmental Authority on Buyer's right to use
the names and marks set forth on Schedule 3.1.19(g) in the
conduct of the Business as presently carried on by Sellers or as
such Business may be carried on and extended by Buyer following
the Closing.
(d) Insurance. Schedule 3.1.20 contains a complete and
correct list and summary description of all insurance policies
maintained by Sellers for the benefit of or in connection with
the Assets or the Business. Sellers have delivered to Vanstar
and Buyer complete and correct copies of all such policies
together with all riders and amendments thereto. Such policies
are in full force and effect, and all premiums due thereon have
been paid. To the best knowledge of Sellers, each Seller has
complied in all material respects with the terms and provisions
of such policies. Schedule 3.1.20 sets out all claims made by
Sellers under any policy of insurance during the past two years
with respect to the Business and in the opinion of Sellers
reasonably formed and held, there is no basis on which a claim
should or could be made under any such policy with respect to it.
2. Real Property.
a. Neither Seller owns, directly or
indirectly, nor does either Seller have any fixed or contingent
obligation to acquire, any interest in real property that is used
in any manner in connection with the Business.
b. Schedule 3.1.21(b) hereto contains a
complete and correct list of all Leases, setting forth the
address, landlord and tenant for each Lease. Sellers have
delivered to Vanstar and Buyer correct and complete copies of the
Leases. Each Lease is legal, valid, binding, enforceable, and in
full force and effect. Neither of the Sellers nor any other
party is in default, violation or breach in any material respect
under any Lease, and no event has occurred and is continuing that
constitutes or, with notice or the lapse of time or both, would
constitute a default, violation or breach in any respect under
any Lease. Each Seller enjoys peaceful and undisturbed
possession under its Leases.
c. The Leased Real Property constitutes all of
the real property leased, occupied or utilized by either Seller
in any manner in connection with the Business or the Assets.
3. Environmental Matters.
a. Compliance with Environmental Laws. To the
best knowledge of Sellers after investigation, each Seller has
complied and is in compliance in all material respects with all
applicable Environmental Laws pertaining to the Leased Real
Property or any of the properties and assets of the Business and
the use and ownership thereof, and to the operation of the
Business. No violation by Seller is being alleged of any
applicable Environmental Law relating to any of the properties
and assets of the Business including the Leased Real Property or
the use or ownership thereof, or to the operation of the
Business.
b. Other Environmental Matters.
(1) Neither of the Sellers nor any other
Person (including any tenant or subtenant) has caused or taken
any action that will result in, and neither Seller is subject to,
any material liability or obligation relating to (x) the
environmental conditions on, under, or about any real property or
other properties leased, operated or used by either Seller or any
predecessor thereto, including the Leased Real Property, at the
present time or in the past, including without limitation, the
air, soil and groundwater conditions at such properties or (y)
the past or present use, management, handling, transport,
treatment, generation, storage, disposal or Release of any
Hazardous Materials.
(2) To the best knowledge of Sellers
after investigation, Sellers have disclosed and made available to
Vanstar and Buyer all information, including, without limitation,
all studies, analyses and test results, in the possession,
custody or control of or otherwise known to either Seller
relating to (x) the environmental conditions on, under or about
any real property, including the Leased Real Property, or other
properties or assets owned, leased, operated or used by either
Seller or any predecessor in interest thereto at the present time
or in the past, and (y) any Hazardous Materials used, managed,
handled, transported, treated, generated, stored or released by
either Seller or any other Person on, under, about or from the
Leased Real Property, or otherwise in connection with the use or
operation of any of the properties and assets of either Seller,
or the Business.
4. Employees, Labor Matters, etc. Except as set forth
in Schedule 3.1.23, neither Seller is a party to or bound by any
collective bargaining agreement and there are no labor unions or
other organizations representing, purporting to represent or, to
the best knowledge of Sellers, attempting to represent any
employees employed in the operation of the Business. To the best
knowledge of Sellers after investigation, there has not occurred
or been threatened, any material strike, slowdown, picketing,
work stoppage, concerted refusal to work overtime or other
similar labor activity with respect to any employees employed in
the operation of the Business. There are no labor disputes
currently subject to any grievance procedure, arbitration or
litigation and there is no representation petition pending or, to
the best knowledge of Sellers after investigation, threatened
with respect to any employee employed in the operation of the
Business. To the best knowledge of Sellers, each Seller has
complied and will comply through the Closing with all provisions
of Applicable Law pertaining to the employment of employees,
including, without limitation, all such Laws relating to labor
relations, equal employment, fair employment practices,
entitlement, prohibited discrimination or other similar
employment practices or acts, except for any failure so to comply
that, individually or together with all such other failures, has
not and will not result in a material liability or obligation on
the part of Vanstar, Buyer or any of their Affiliates or the
Business, and has not had or resulted in, and will not have or
result in, a Material Adverse Effect.
5. Employee Benefit Plans. Schedule 3.1.24 lists each
pension, retirement, profit-sharing, deferred compensation, bonus
or other incentive plan, or other employee benefit program,
arrangement, agreement or understanding, or medical, vision,
dental or other health plan, or life insurance or disability
plan, or any other employee benefit plan, including, without
limitation, any "employee benefit plan" as defined in
Section 3(3) of ERISA, to which either Seller contributes or to
which either Seller is a party or by which either Seller is bound
or under which either Seller may have any liability and under
which employees or former employees of either Seller involved in
the Business (or their beneficiaries) are eligible to participate
or derive a benefit ("Employee Benefit Plans"). Sellers have
delivered to Vanstar and Buyer true, correct and complete copies
of all Employee Benefit Plans. None of the Assets is subject to
any lien in favor of, or enforceable by, the Pension Benefit
Guaranty Corporation.
6. Confidentiality. Except as set forth on Schedule
3.1.25, to the best knowledge of Sellers, each Seller has taken
all steps necessary to preserve the confidential nature of all
material confidential information (including, without limitation,
any proprietary information) with respect to the Business,
including but not limited to information relating to the
distribution, marketing or pricing of any of its products or
services or any promotional plans related thereto.
7. No Guarantees. Except as set forth on Schedule
3.1.26, none of the obligations or liabilities of the Business or
of either Seller incurred in connection with the operation of the
Business is guaranteed by or subject to a similar contingent
obligation of any other Person. Neither Seller has guaranteed or
become subject to a similar contingent obligation in respect of
the obligations or liabilities of any other Person. Except as
set forth on Schedule 3.1.26, there are no outstanding letters of
credit, surety bonds or similar instruments of either Seller or
any Affiliate of either Seller in connection with the Business or
the Assets.
8. Records. The minute books of Sellers insofar as
they relate to or affect the Business and the Assets are
substantially complete and correct in all material respects. The
books of account of Sellers, insofar as they relate to or affect
the Business and the Assets, are sufficient to prepare the
Financial Statements in accordance with GAAP. There are no false
or fictitious entries on the books and records of either Seller.
9. Brokers, Finders, etc. All negotiations relating to
this Agreement and the Collateral Agreements, and the
transactions contemplated hereby and thereby, have been carried
on without the participation of any Person acting on behalf of
either Seller or any Affiliate of either Seller in such manner as
to give rise to any valid claim against the Assets, Vanstar,
Buyer or any of their Affiliates for any brokerage or finder's
commission, fee or similar compensation, or for any bonus payable
to any officer, director, employee, agent or sales representative
of or consultant to either Seller or any Affiliate of either
Seller upon consummation of the transactions contemplated hereby
or thereby or otherwise.
10. Disclosure. Except to the extent specifically
limited with regard to the knowledge of any Person in this
Article III, no representation or warranty by either Seller
contained in this Agreement nor any certificate or agreement
furnished or to be furnished by or on behalf of either Seller to
Vanstar or Buyer or their representatives in connection herewith
or pursuant hereto contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material
fact required to make the statements contained herein or therein
not misleading. There is no fact (other than matters of a
general economic or political nature which do not affect the
Business uniquely) known to either Seller that has not been
disclosed by Sellers to Vanstar and Buyer that might reasonably
be expected to have or result in a Material Adverse Effect with
respect to the Business or the Assets.
11. Receivables. All of Sellers' Accounts Receivable
which have arisen in connection with the Business and which are
reflected in the Financial Statements, and all such receivables
which will have arisen since the Cut-off Date through the
Closing, shall have arisen only from bona fide transactions in
the ordinary course of business. Neither Seller has any
knowledge of any facts or circumstances generally (other than
general economic conditions) which would result in any material
increase in the uncollectability of such receivables in excess of
the reserves therefor set forth on the Cut-off Balance Sheet.
Schedule 3.1.30 hereto accurately lists as of the Cut-off Date
all receivables arising out of or relating to the Business, the
amount owing and the aging of such receivables, the name and last
known address of the party from whom such receivable is owing,
and any security in favor of either Seller for the repayment of
such receivable which such Seller purports to have. Sellers have
delivered to Vanstar and Buyer complete and correct copies of all
instruments, documents and agreements evidencing such receivables
and of all instruments, documents or agreements, if any, creating
security therefor ("Security"). To the best knowledge of
Sellers, each Seller has valid and perfected security interests
in such Security (to the extent such priority may be obtained
under Applicable Law by possession of such Security or the filing
of financing statements or similar documents with respect
thereto).
12. Backlog. All of Sellers' backlog of unfilled
orders for products manufactured or sold by either Seller in or
with respect to the Business represent bona fide transactions
incurred in the ordinary course of the respective business of
such Seller and are set forth in Schedule 3.1.31 hereto.
13. Liabilities to Affiliates. Except as set forth on
Schedule 3.1.32, as of the Closing, the Assumed Liabilities will
not include any amounts owed by DSC to Dataflex or by Dataflex to
DSC or any other amounts owing to any other Affiliate of Dataflex
or any Person acting as the transferee of any of them.
14. Excluded Businesses. The Cutoff Date Balance
Sheet does not reflect and the Net Worth Report will not reflect
any asset, liability, cost, expense, income or other item
constituting an asset, liability, cost, expense, income or other
item of or properly attributable to, the Valtron Business or the
Onyx Business.
A. Representations and Warranties of Vanstar and Buyer.
Vanstar and Buyer, jointly and severally, represent and warrant
to Sellers as follows:
1. Corporate Status; Authorization, etc. Each of
Vanstar and Buyer is a corporation duly organized, validly
existing and in good standing, under the laws of the jurisdiction
of its incorporation with full corporate power and authority to
execute and deliver this Agreement and the Collateral Agreements
to which it is a party, to perform its obligations thereunder and
to consummate the transactions contemplated hereby and thereby.
The execution and delivery by each of Vanstar and Buyer of this
Agreement, and the consummation of the transactions contemplated
hereby, have been, and on the Closing Date the Collateral
Agreements to which it is a party will have been, duly authorized
by all requisite corporate action of Vanstar and Buyer. Each of
Vanstar and Buyer has duly executed and delivered this Agreement
and on the Closing Date each of Vanstar and Buyer will have duly
executed and delivered the Collateral Agreements to which it is a
party. This Agreement is, and on the Closing Date each of the
Collateral Agreements to which Vanstar or Buyer is a party will
be, valid and legally binding obligations of Vanstar or Buyer, as
the case may be, enforceable against Vanstar or Buyer, as the
case may be, in accordance with their respective terms.
2. No Conflicts, etc. The execution, delivery and
performance by each of Vanstar and Buyer of this Agreement and
each of the Collateral Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby,
do not and will not conflict with or result in a violation of or
under (with or without the giving of notice or the lapse of time,
or both) (i) the articles of incorporation or bylaws of Vanstar
and Buyer, (ii) any Applicable Law applicable to Vanstar, Buyer,
or any of their Affiliates or any of their properties or assets
or (iii) any contract, agreement or other instrument applicable
to Vanstar, Buyer or any of their Affiliates or any of their
properties or assets, except, in the case of clause (iii), for
violations and defaults that, individually and in the aggregate,
have not and will not materially impair the ability of Vanstar or
Buyer to perform its obligations under this Agreement or under
any of the Collateral Agreements to which it is a party. Except
as specified in Schedule 3.2.2, no Governmental Approval or other
Consent is required to be obtained or made by Vanstar or Buyer in
connection with the execution and delivery of this Agreement or
the Collateral Agreements or the consummation of the transactions
contemplated thereby.
3. Litigation. There is no action, claim, suit or
proceeding pending, or to the best knowledge of Vanstar or Buyer,
threatened, by or against or affecting Vanstar, Buyer or any of
their Affiliates in connection with or relating to the
transactions contemplated by this Agreement or of any action
taken or to be taken in connection herewith or the consummation
of the transactions contemplated hereby.
4. Brokers, Finders, etc. All negotiations
relating to this Agreement and the transactions contemplated
hereby have been carried on without the participation of any
Person acting on behalf of Vanstar or Buyer in such manner as to
give rise to any valid claim against either Seller for any
brokerage or finder's commission, fee or similar compensation.
ARTICLE I. COVENANTS
A. Covenants of Sellers.
1. Conduct of Business. From the date hereof to
the Closing Date, except as expressly permitted or required by
this Agreement or as otherwise consented to by Vanstar and Buyer
in writing, each Seller will:
a. carry on the Business in, and only in, the
ordinary course, in substantially the same manner as heretofore
conducted, and with respect to the Business, use all reasonable
efforts to preserve intact its present business organization,
maintain its properties in good operating condition and repair,
keep available the services of its present officers and
significant employees, and preserve its relationship with
customers, suppliers and others having business dealings with it,
with the goal and intent that its goodwill and ongoing business
shall be in all material respects unimpaired following the
Closing;
b. pay accounts payable and other obligations
of the Business when they become due and payable in the ordinary
course of business consistent with prior practice;
c. perform in all material respects all of its
obligations under all Contracts and other agreements and
instruments relating to or affecting the Business or the Assets,
and comply in all material respects with all Applicable Laws
applicable to it, the Assets or the Business:
d. other than sales and purchases of
Inventories in the ordinary course where delivery is contemplated
not later than the calendar month following the Determination
Date, not enter into or assume any material agreement, contract
or instrument relating to the Business, or enter into or permit
any material amendment, supplement, waiver or other modification
in respect thereof;
e. not grant (or commit to grant) any increase
in the compensation (including incentive or bonus compensation)
of any employee employed in the operation of the Business (other
than normal merit pay increases made in the ordinary course of
the Business, consistent with past practices) or institute, adopt
or amend (or commit to institute, adopt or amend) any
compensation or benefit plan, policy, program or arrangement or
collective bargaining agreement applicable to any such employee;
f. continue all policies of insurance relating
to the Business in full force and effect;
g. not make any change or modification in
Sellers' accounting practices, policies or procedures which in
any way affect the Business, including any change or modification
with respect to the allocation of revenues, costs and expenses
applicable to the Business; and
h. not take any action or knowingly omit to
take any action, which action or omission would result in a
breach of any of the representations and warranties set forth in
Section 3.1.
2. No Solicitation. Neither of the Sellers nor any
Affiliate of either of the Sellers, nor any Person acting on
either's behalf shall (i) solicit or encourage any inquiries or
proposals for, or enter into any discussions with respect to, the
acquisition of any properties and assets held for use in
connection with, necessary for the conduct of, or otherwise
material to, the Business or (ii) furnish or cause to be
furnished any non-public information concerning the Business to
any Person (other than Buyer and its agents and representatives),
other than in the ordinary course of business or pursuant to
Applicable Law and after prior written notice to Buyer. Neither
Seller shall sell, transfer or otherwise dispose of, grant any
option or proxy to any Person with respect to, create any Lien
upon, or transfer any interest in, any Asset, other than in the
ordinary course of business and consistent with this Agreement.
Neither Seller shall transfer or otherwise dispose of, grant any
option or proxy to any Person with respect to, create any Lien
upon, or transfer any interest in, any of the capital stock of
DSC which would impair either Seller's ability to perform its
obligations hereunder, other than pursuant to the provisions of
this Agreement.
3. Access and Information.
a. Subject to the remainder hereof, each
Seller will retain all books and records relating to the Business
(and which are not transferred to Vanstar or Buyer hereunder or
pursuant hereto) in accordance with Sellers' record retention
policies as presently in effect and will make such books and
records available to Vanstar and Buyer from time to time, upon
reasonable notice, for the purpose of making copies of or
extracts therefrom in connection with tax matters or similar
corporate purposes. During the seven-year period beginning on
the Closing Date, neither Seller shall dispose of or knowingly
permit the disposal of any such books and records without first
giving 60 days' prior written notice to Vanstar and Buyer
offering to surrender the same to Vanstar or Buyer at Vanstar's
or Buyer's expense.
4. Public Announcements. Except as required by
Applicable Law, neither Seller shall, and neither Seller shall
permit any Affiliate to, make any public announcement in respect
of this Agreement or the transactions contemplated hereby without
the prior written consent of Vanstar and Buyer.
5. Further Actions.
a. Each Seller agrees to use all reasonable
good faith efforts to take all actions and to do all things
necessary, proper or advisable to consummate the transactions
contemplated hereby by the Expected Closing Date.
b. Other than providing any notices permitted
to be delivered to creditors under any bulk sales or similar
laws, the provision of which is elective, Sellers will, as
promptly as practicable, file or supply, or cause to be filed or
supplied, all applications, notifications and information
required to be filed or supplied by either of them pursuant to
Applicable Law in connection with this Agreement, the Collateral
Agreements, the sale and transfer of the Assets pursuant to this
Agreement and the consummation of the other transactions
contemplated thereby, including but not limited to any necessary
filings pursuant to the HSR Act.
c. Sellers, as promptly as practicable, will
use all reasonable efforts to obtain, or cause to be obtained,
all Consents (including, without limitation, all Governmental
Approvals and any Consents required under any contract) necessary
to be obtained by either of them in order to consummate the sale
and transfer of the Assets pursuant to this Agreement and the
consummation of the other transactions contemplated thereby.
d. Each Seller will, and will cause each of
its Affiliates to, coordinate and cooperate with Vanstar and
Buyer in exchanging such information and supplying such
assistance as may be reasonably requested by Vanstar or Buyer in
connection with the filings and other actions contemplated by
Section 4.2.2.
e. At all times prior to the Closing, each
Seller shall promptly notify Vanstar and Buyer in writing of any
fact, condition, event or occurrence known to either of them in
the exercise of reasonable business prudence that will or may
result in the failure of any of the conditions contained in
Sections 5.1 and 5.2 to be satisfied, promptly upon either of
them becoming aware of the same.
6. Further Assurances. Following the Closing, each
Seller shall, and shall cause each of its Affiliates to, from
time to time, execute and deliver such additional instruments,
documents, conveyances or assurances and take such other actions
as shall be necessary, or otherwise reasonably requested by
Vanstar or Buyer, to confirm and assure the rights and
obligations provided for in this Agreement and in the Collateral
Agreements and render effective the consummation of the
transactions contemplated thereby. Without limiting the
generality of the foregoing, the parties specifically contemplate
closing the transactions contemplated herein prior to the time
that full compliance by Sellers with the conditions precedent set
forth in Sections 5.2.3, 5.2.7(b) and (c) and 5.2.8 will be
practicable. As a result, notwithstanding the Closing, this
Section 4.1.6 shall require prompt delivery thereafter by Sellers
of the consents, instruments and agreements called for herein,
including in Sections 5.2.3, 5.2.7 and 5.2.8.
7. Liability for Transfer Taxes. Sellers shall be
responsible for the timely payment of, and shall indemnify and
hold harmless Vanstar, Buyer and their Affiliates against, all
sales (including, without limitation, bulk sales), use, value
added, documentary, stamp, gross receipts, registration,
transfer, conveyance, excise, recording, license and other
similar Taxes and fees ("Transfer Taxes"), arising out of or in
connection with or attributable to the transactions effected
pursuant to this Agreement and the Collateral Agreements.
Sellers shall prepare and timely file all Tax Returns required to
be filed in respect of Transfer Taxes (other than any elective
notices permitted to be given to creditors as provided in any
applicable bulk transfer laws), provided that Vanstar or Buyer
shall be permitted to prepare any such Tax Returns that are the
primary responsibility of Vanstar or Buyer under Applicable Law.
Vanstar's or Buyer's preparation of any such Tax Returns shall be
subject to Sellers' approval, which approval shall not be
withheld unreasonably.
8. Certificates of Tax Authorities. On or before
the Closing Date, if reasonably obtainable, or promptly
thereafter, Sellers shall provide to Vanstar and Buyer copies of
certificates from the appropriate taxing authority stating that
no Taxes are due to any state or other taxing authority for which
Vanstar, Buyer or any of their Affiliates could have liability to
withhold or pay Taxes with respect to the transfer of the Assets
or the Business; provided, however, that any failure to provide
such certificates to Vanstar and Buyer which is not the fault of
either Seller shall not relieve Vanstar and Buyer of their
obligations to complete the Closing. If Sellers shall fail to
provide such certificates, Vanstar or Buyer may withhold such
amount as may be necessary, based upon Vanstar's or Buyer's
reasonable estimate of the amount of such potential liability, or
as determined by the appropriate taxing authority, to cover such
Taxes until such time as certificates are provided.
B. Covenants of Vanstar and Buyer.
1. Public Announcements. Prior to the Closing,
except as required by Applicable Law, neither Vanstar nor Buyer
shall, and neither Vanstar nor Buyer shall permit any Affiliate
to, make any public announcement in respect of this Agreement or
the transactions contemplated hereby without the prior written
consent of Sellers.
2. Further Actions.
a. Vanstar and Buyer agree to use all
reasonable good faith efforts to take all actions and to do all
things necessary, proper or advisable to consummate the
transactions contemplated hereby by the Expected Closing Date.
b. Vanstar and Buyer will, as promptly as
practicable, file or supply, or cause to be filed or supplied,
all applications, notifications and information required to be
filed or supplied by Vanstar or Buyer pursuant to Applicable Law
in connection with this Agreement, the Collateral Agreements,
Buyer's acquisition of the Assets pursuant to this Agreement and
the consummation of the other transactions contemplated hereby
and thereby, including but not limited to, any necessary filings
pursuant to the HSR Act.
c. Vanstar and Buyer will coordinate and
cooperate with Sellers in exchanging such information and
supplying such reasonable assistance as may be reasonably
requested by either Seller in connection with the filings and
other actions contemplated by Section 4.1.5.
d. At all times prior to the Closing, Vanstar
and Buyer shall promptly notify Sellers in writing of any fact,
condition, event or occurrence that will or may result in the
failure of any of the conditions contained in Sections 5.1 and
5.3 to be satisfied, promptly upon becoming aware of the same.
e. Promptly following the Closing, Vanstar,
Buyer and Sellers shall review the Onyx Business. Following that
review, Vanstar and Buyer may elect, in their discretion, but
subject to the approval of Onyx and Sellers, to accept an
assignment of the Onyx Agreement or to modify or amend such
agreement in a manner that would contemplate the continuation of
the Onyx Business in any manner by or with Buyer. Vanstar, Buyer
and Sellers shall also review such other ways or methods that
might be acceptable to Vanstar and Buyer, in their discretion,
and solely as an accommodation to Sellers, to assist Sellers in
the collection of the Onyx Receivables and/or to assist Sellers
in providing services or products pursuant to the Onyx Agreement.
Notwithstanding the foregoing, in no event shall Vanstar or Buyer
in any way be obligated to enter into or otherwise consummate any
arrangement relating to the Onyx Agreement or the Onyx Business
or to otherwise incur any obligation or liability with respect
thereto, all of which obligations and liabilities shall remain
with and shall be discharged by Sellers except to the extent
Vanstar and Buyer shall elect, in their discretion, to assume or
discharge in connection with any arrangements that might be
implemented pursuant to this Section 4.2.2(e). Nothing in this
subsection is intended to nor shall it be interpreted or applied
in such a fashion as to interfere with the rights of Sellers or
any third party.
3. Conduct of the Business. From and after the
Closing and until the Determination Date, except as expressly
permitted or required by this Agreement or as otherwise consented
to by Sellers in writing, Vanstar and Buyer will:
a. carry on the Business in, and only in the
ordinary course, in substantially the same manner as previously
conducted by Sellers;
b. perform in all material respects all of
their respective obligations, or the obligations assigned them
hereunder, under all Contracts and other agreements and
instruments relating to or affecting the Business or the Assets,
and complying in all material respects with all Applicable Laws
applicable to them, the Businesses or the Assets;
c. apply all cash received from the operation
of the Business (including, without limitation, cash received
from the collection of Accounts Receivable), to the payment of
liabilities and obligations relating solely to the Business
(including, without limitation, the reimbursement payments to
Dataflex for employees pursuant to Section 6.1(c) hereof), or to
the purchase of inventory or other assets specifically related to
the Business and which will be reflected as an asset on the Net
Worth Report.
d. except as may occur in the ordinary course,
not permit any termination or any material modification or
amendment or waive any obligation arising from or relating to
Accounts Receivable or Vendor Receivables; and
e. not make any change or modification in the
accounting policies, procedures or practices utilized in or by
the Business, or modify any database, computer software or device
utilized in connection therewith (except that Vanstar and Buyer
may install and operate their own systems, so long as Sellers are
maintained intact); and
4. Further Assurances. Following the Closing,
Vanstar and Buyer each shall, and each shall cause all of its
Affiliates to, from time to time, execute and deliver such
additional instruments, documents, conveyances or assurances and
take such other actions as shall be necessary, or otherwise
reasonably requested by either Seller, to confirm and assure the
rights and obligations provided for in this Agreement and in the
Collateral Agreements and render effective the consummation of
the transactions contemplated thereby.
5. Sellers' Records. Vanstar and Buyer will retain
all books and records relating to the Business (and which are to
be transferred by Sellers to Vanstar and Buyer hereunder) in
accordance with their record retention policies as presently in
effect and will make such books and records available to Sellers
from time to time, upon reasonable notice, for the purpose of
making copies of or extracts therefrom in connection with tax
matters or similar corporate purposes. During the seven (7) year
period beginning on the Closing Date, neither Vanstar nor Buyer
shall dispose of or knowingly permit the disposal of any such
books and records without first giving sixty (60) day's prior
written notice to Sellers offering to surrender the same to
Sellers at Sellers expense.
6. Performance by Buyer. Vanstar hereby guarantees
the performance of all covenants of Buyer contained herein and
the payment and performance by Buyer of the Assumed Liabilities.
C. Use of Business Names by Buyer. To the extent that
the trademarks, service marks, brand names or trade, corporate or
business names which are not part of the Assets (the "Names") of
either Seller or of any of their Affiliates are used by the
Business on stationery, signage, invoices, receipts, forms,
packaging, advertising and promotional materials, product,
training and service literature and materials, computer programs
or like materials ( "Marked Materials") or appear on Inventory at
the Closing, Vanstar and Buyer may use such Marked Materials or
sell such Inventory after the Closing. In addition, for a period
of not less than one year following the Closing, Vanstar and
Buyer shall be entitled to use the Names, and variations thereof
in connection with the Assets and the Business, including, but
not limited to, collection of outstanding Accounts Receivable
constituting part of the Assets; provided, however, Vanstar and
Buyer agree that the foregoing right to use the Marked Materials
and Names are for the limited purposes specified herein and that
Vanstar and Buyer will cease using such Marked Materials and
Names as soon as reasonably practicable. Notwithstanding the
foregoing, Buyer and Vanstar shall only use the Marked Materials
to the extent necessary to collect accounts receivable and assure
the transition of the operations relating to the Business to
Vanstar and Buyer and shall not seek to derive any other benefit
therefrom. Without limiting the generality of the foregoing,
Vanstar and Buyer shall use reasonable efforts to cover or
conceal (without repackaging or causing damage) the Names
displayed on packing cases, shipping materials, buildings,
uniforms and other signage and shall have clearly indicate on any
letterhead, purchase orders, notices or similar items the fact of
the acquisition of the Business by Vanstar and Buyer, with the
intent that customers of the Business not be confused as to the
source of any Marked Materials utilized by Vanstar and Buyer.
ARTICLE II. CONDITIONS PRECEDENT
A. Conditions to Obligations of Each Party. The
obligations of the parties to consummate the transactions
contemplated hereby shall be subject to the fulfillment on or
prior to the Closing Date of the following conditions:
1. HSR Act Notification. In respect of any
necessary notifications of Vanstar, Buyer and Sellers pursuant to
the HSR Act, the applicable waiting period and any extensions
thereof shall have expired or been terminated.
2. No Injunction, etc. Consummation of the
transactions contemplated hereby shall not have been restrained,
enjoined or otherwise prohibited by any Applicable Law, including
any order, injunction, decree or judgment of any court or other
Governmental Authority. No court or other Governmental Authority
shall have determined any Applicable Law to make illegal the
consummation of the transactions contemplated hereby or by the
Collateral Agreements, and no proceeding with respect to the
application of any such Applicable Law to such effect shall be
pending.
B. Conditions to Obligations of Buyer. The obligations
of Vanstar and Buyer to consummate the transactions contemplated
hereby shall be subject to the fulfillment (or waiver by Vanstar
and Buyer, in their sole discretion) on or prior to the Closing
Date of the following additional conditions, which each Seller
agrees to use reasonable good faith efforts to cause to be
fulfilled:
1. Representations, Performance. The
representations and warranties of each Seller contained in this
Agreement and in the Collateral Agreements (i) shall be true and
correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty
without any materiality qualification) at and as of the date
hereof, and (ii) shall be repeated and shall be true and correct
in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material
respects (in the case of any representation or warranty without
any materiality qualification) on and as of the Closing Date with
the same effect as though made on and as of the Closing Date.
Each Seller shall have duly performed and complied in all
material respects with all agreements and conditions required by
this Agreement and each of the Collateral Agreements to be
performed or complied with by it prior to or on the Closing Date.
Each Seller shall have delivered to Vanstar and Buyer a duly
authorized, properly executed certificate, dated the Closing Date
to the foregoing effect.
2. Financing. Vanstar and Buyer shall have
obtained the consent of IBM Credit to the consummation of the
transactions contemplated hereby, on terms and conditions
reasonably satisfactory to Vanstar and Buyer.
3. Consents. Sellers shall have obtained and shall
have delivered to Vanstar and Buyer copies of (i) all
Governmental Approvals required to be obtained by either Seller
in connection with the execution and delivery of this Agreement
and the Collateral Agreements and the consummation of the
transactions contemplated hereby or thereby and (ii) all Consents
(including, without limitation, all Consents required under any
Contract), other than elective notices to creditors permitted
under applicable bulk transfer laws, necessary to be obtained in
order to consummate the sale and transfer of the Assets pursuant
to this Agreement and the consummation of the other transactions
contemplated thereby and by the Collateral Agreements, unless the
failure to obtain any such Consent would not, individually or in
the aggregate, have a Material Adverse Effect.
4. No Material Adverse Effect. No event,
occurrence, fact, condition, change, development or effect shall
have occurred, exist or come to exist since the Cut-off Date,
that, individually or in the aggregate, has constituted or
resulted in, or could reasonably be expected to constitute or
result in, a Material Adverse Effect.
5. Opinion of Counsel. Vanstar and Buyer shall
have received an opinion, addressed to them and dated the Closing
Date, from Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, counsel
to Seller, in substance and form reasonably satisfactory to
Vanstar and Buyer.
6. Corporate, Other Proceedings. All corporate and
other proceedings of Sellers in connection with this Agreement
and the Collateral Agreements and the transactions contemplated
thereby, and all documents and instruments incident thereto,
shall be reasonably satisfactory in substance and form to Vanstar
and Buyer and their counsel, and Vanstar and Buyer and their
counsel shall have received all such documents and instruments,
or copies thereof, certified if requested, as may be reasonably
requested.
7. Transfer Documents. Sellers shall have
delivered to Vanstar and Buyer at the Closing all documents,
certificates and agreements necessary to transfer to Buyer good
and marketable title to the Assets, free and clear of any and all
Liens thereon, other than Permitted Liens, including without
limitation:
a. a bill of sale, assignment and general
conveyance, in form and substance reasonably satisfactory to
Vanstar and Buyer, dated the Closing Date, with respect to the
Assets;
b. assignments of all Contracts, leases (including the
Leases), Intellectual Property and any other agreements and
instruments constituting Assets, dated the Closing Date,
assigning to Buyer all of Sellers' rights, title and interests
therein and thereto, with, at Vanstar's election, any required
Consent endorsed thereon:
c. certificates of title to all motor vehicles
included in the Assets to be transferred to Buyer hereunder, duly
endorsed for transfer to Buyer as of the Closing Date.
8. Vendor Arrangements. To the extent
transferable, Vanstar and Buyer shall have received appropriate
transfers of dealer or dealership authorizations from the major
vendors to the Business, which shall include the transfer,
without any material modification thereof, of the rights of each
Seller to receive or otherwise participate in any special pricing
arrangements, promotional programs, rebate arrangements, return
policies or special terms (or Sellers will use their best efforts
following Closing to assist Vanstar and Buyer in attempting to
secure such transfers, to the extent transferable, in the event
such transfers have not been received by Closing). Without
limiting the foregoing, Sellers shall transfer to Vanstar and
Buyer any economic benefits relating to any special pricing
arrangements, promotional programs, rebate arrangements, return
policies or special terms, applicable to the Business to the
extent of any rights which either Seller may have in respect
thereof.
9. COBRA Obligations. Vanstar and Buyer shall have
received assurances in form and substance satisfactory to them
(that may include insurance certificates) that Sellers have made
all provisions necessary under Applicable Law, including for
these purposes proposed Regulation Section 1.162-26 et. seq., of
the regulations currently proposed to be adopted pursuant to the
Internal Revenue Code of 1986, as amended (the "Proposed
Regulations") with regard to an employer's obligation to provide
for a continuation of health insurance and other benefits of an
employee of Seller relating to the Business, whether or not
employed by Vanstar or Buyer following termination of employment.
10. Certain Employment Arrangements. Vanstar and Buyer
shall have determined, in their sole discretion, that the
employment of Mr. Peter Jackson, currently, the Co-President of
Dataflex, with Vanstar and Buyer following the Closing will be on
terms and conditions satisfactory to Vanstar and Buyer.
11. Accounting Matters. Vanstar and Buyer shall
have received such reasonable assurances as they shall have
deemed appropriate, including such assurances from Buyers'
Accountants, to the effect that (i) the accounting practices,
policies and procedures utilized by Sellers' Accountants in
preparing the Business Financial Statements fairly present the
financial condition of and results of operations for the Business
for the periods indicated; (ii) Sellers have not breached the
representations and warranties contained in Section 3.1.7(u); and
(iii) except as set forth on Schedule 5.2.11, the Business
Financial Statements do not differ materially from the unaudited
financial statements of the Business previously furnished by
Sellers to Vanstar and Buyer in connection with the negotiation
and preparation of this Agreement.
C. Conditions to Obligations of Sellers. The obligation
of Sellers to consummate the transactions contemplated hereby
shall be subject to the fulfillment (or waiver by Sellers in
their sole discretion), on or prior to the Closing Date, of the
following additional conditions, which Vanstar and Buyer agree to
use reasonable good faith efforts to cause to be fulfilled.
1. Representations, Performance, etc. The
representations and warranties of Vanstar and Buyer contained in
this Agreement and the Collateral Agreements (i) shall be true
and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all
material respects (in the case of any representation or warranty
without any materiality qualification) at and as of the date
hereof and (ii) shall be repeated and shall be true and correct
in all respects (in the case of any representation or warranty
containing any materiality qualification) or in all material
respects (in the case of any representation or warranty without
any materiality qualification) on and as of the Closing Date with
the same effect as though made at and as of such time. Each of
Vanstar and Buyer has duly performed and complied in all material
respects with all agreements and conditions required by this
Agreement and the Collateral Agreements to be performed or
complied with by it prior to or on the Closing Date. Each of
Vanstar and Buyer shall have delivered to Sellers a certificate,
dated the Closing Date and signed by its duly authorized officer,
to the foregoing effect.
2. Assumption Agreement. Sellers shall have
received from Buyer the Assumption Agreement in the form attached
hereto as Exhibit B.
3. Opinion of Counsel. Sellers shall have received
an opinion, addressed to them and dated the Closing Date, of
Arter & Hadden, counsel for Vanstar and Buyer, in form and
substance reasonably satisfactory to Sellers.
4. Corporate Proceedings. All corporate
proceedings of Vanstar and Buyer in connection with this
Agreement and the Collateral Agreements and the transactions
contemplated hereby and thereby, and all documents and
instruments incident thereto, shall be reasonably satisfactory in
substance and form to Sellers, and their counsel, and Sellers and
their counsel shall have received all such documents and
instruments, or copies thereof, certified if requested, as may be
reasonably requested.
5. Consents and Approvals. Sellers shall have
obtained all Governmental Approvals necessary to consummate the
transactions contemplated hereby.
6. Collateral Agreements. Vanstar and Buyer shall
have entered into each of the Collateral Agreements to which it
is a party.
ARTICLE III. EMPLOYEES AND EMPLOYEE BENEFIT PLANS
A. Employment of Sellers' Employees.
a. Sellers will use all reasonable efforts to
cause the employees employed in the Business to make available
their employment services to Buyer. Notwithstanding the
foregoing, however, neither Vanstar, Buyer nor any of their
Affiliates shall have any obligation to hire or otherwise retain
the services of any such employee. As to any such employee
offered employment by Buyer (including any Transition Employee
who becomes a Transferred Employee), for a period of two years
from the Closing Date, neither Seller will and neither Seller
will permit any of its Affiliates to, solicit, offer to employ or
retain the services of or otherwise interfere with the
relationship of Vanstar, Buyer or any of their Affiliates with
any former employee of either Seller employed by or otherwise
engaged to perform services for Vanstar, Buyer or any of their
Affiliates.
b. Contemporaneously with the Closing, Buyer
shall offer employment to those employees selected by Buyer, in
its sole discretion, who are employed by either Seller in the
Business, at wage or salary levels, as applicable, and with
employee benefits that are competitive with its similarly
situated employees. Those employees who accept such offers of
employment effective as of the Closing Date shall be referred to
herein as the "Transferred Employees". Notwithstanding the
provisions hereof, except as specifically provided in this
Section 6.1(b), such Transferred Employees shall be considered
"new hires" and Buyer shall not assume any liability of either
Seller in respect of the Transferred Employees or any other
Person, including any liability for accrued but unpaid salaries,
wages, vacation or sick pay or incentive compensation and Sellers
shall remain liable therefor and shall also remain responsible
for payment of any and all retention, change in control or other
similar compensation or benefits which are or may become payable
in connection with the consummation of the transactions
contemplated by this Agreement or the Collateral Agreements.
Subject to Buyer receiving satisfactory verification of amounts
due from each employee in question, Buyer shall assume Sellers'
obligations with respect to accrued vacation pay and accrued but
unpaid salaries, wages and commissions incurred in the ordinary
course and set forth on the Determination Date Balance Sheet in
respect of Transferred Employees, but only to the extent
described in the Cut-off Date Balance Sheet (or incurred in the
ordinary course thereafter) and included among the Assumed
Liabilities. Notwithstanding the foregoing provisions, as a
matter of convenience or otherwise, it is anticipated that
Sellers may pay all or part of the vacation pay and other
obligations with respect to the Transferred Employees assumed by
Vanstar and Buyer hereunder and, in such event, all such amounts
so paid by Sellers shall not be included as liabilities in the
Net Worth Report, except to the extent of any cash reimbursement
thereby is made by Vanstar or Buyer.
c. On or prior to the Closing Date, Buyer
shall designate, in its discretion, those employees employed by
either Seller in the Business whose services Buyer desires such
Seller to make available to Buyer to assist Buyer during a
specified period for each such employee determined by Buyer, in
its discretion, which period shall be not more than ninety (90)
days following the Closing Date (each employee so designated by
Buyer shall be referred to herein as a "Transition Employee" and
such employment period, determined with reference to each such
employee, being referred to herein as the "Transition Period").
Sellers shall use all reasonable efforts to retain the services
of each Transition Employee and to cause each Transition Employee
to make available his or her employment services to Buyer.
During the Transition Period such Transition Employees shall
remain employees of the applicable Seller, and Buyer shall
continue all Employee Benefit Plans, employee benefits and
policies of insurance (including workers compensation and
liability) relating to such Transition Employees. Vanstar or
Buyer shall pay to Sellers within ten (10) business days
following each payment of salary to the Transition Employees, an
amount equal to each such Employee's salary, plus 24% together
with an amount equal to any Stay Bonuses that have been paid
during such period pursuant to Section 6.1(e) hereof. At any
time during the Transition Period with respect to a Transition
Employee, Buyer shall have the right, but not the obligation, to
make an offer of employment, in its sole discretion, to such
Transition Employee, at wage or salary levels, and with employee
benefits competitive with those being offered by Buyer to its
other similarly situated employees. Those Transition Employees
who accept such offers of employment shall thereupon be
considered "Transferred Employees."
d. Neither Vanstar, Buyer nor any of their
Affiliates shall have any liability under or pursuant to ERISA,
or otherwise, with respect to any employee of Sellers or any of
their Affiliates or with respect to any Employee Benefit Plan or
any claim thereof or related thereto. Except as specifically
provided in Section 6.1(b) with regard to vacation pay applicable
to Transferred Employees, from and after the Closing, Sellers
shall remain solely responsible for any and all liabilities,
claims and obligations in respect of the Transition Employees,
Transferred Employees and their beneficiaries and dependents,
relating to or arising in connection with or as a result of (i)
the employment or the actual or constructive termination of
employment of any such employee by either Seller or any of their
Affiliates (including, without limitation, in connection with the
consummation of the transactions contemplated by this Agreement
or the Collateral Agreements), (ii) the participation in or
accrual of benefits or compensation under, or the failure to
participate in or to accrue compensation or benefits under, any
Employee Benefit Plan or other employee or retiree benefit or
compensation plan, program, practice, policy, agreement or
arrangement of either Seller or any of their Affiliates, and
(iii) accrued but unpaid salaries, wages, bonuses, incentive
compensation, vacation or sick pay or other compensation or
payroll items (including, without limitation, deferred
compensation).
e. Not later than the Closing Date, Sellers
shall offer each Transition Employee a bonus (the "Stay Bonus")
payable upon the first to occur of the (i) end of the Transition
Period, if such Transition Employee shall then be employed by
Sellers, and (ii) the date that such Transition Employee shall
accept employment with Vanstar or Buyer, equal to twenty-five
percent (25%) of the gross wages or salary actually received by
such Transition Employee during the Transition Period; provided,
however, that the Stay Bonus shall not be payable in the event of
the voluntary termination of a Transition Employee without the
consent of Vanstar and Buyer. Vanstar and Buyer shall, promptly
upon invoice therefore, reimburse Sellers for any Stay Bonuses
actually paid.
B. Welfare and Benefit Plans.
a. From and after the Closing Date, Sellers shall
remain solely responsible for any and all liabilities, claims and
obligations in respect of any employee of Sellers or any of their
Affiliates (i) under any Employee Benefit Plan that is an
"employee welfare benefit plan" (within the meaning of section
3(1) of ERISA) that provides post-employment benefits of any kind
(a "Seller Retiree Welfare Plan") or (ii) otherwise in connection
with the provision of, or the failure to provide, post-employment
welfare benefits or coverage to or in respect of any such
employee.
b. From and after the Closing Date, Sellers shall
remain solely responsible for any and all liabilities, claims and
obligations relating to or arising in connection with the
requirements of section 4980B of the Code to provide continuation
of health care coverage under any Employee Benefit Plan, in
respect of (A) employees of Sellers or any of their Affiliates,
other than the Transferred Employees and their covered
dependents, and (B) to the extent related to a qualifying event
occurring on or before the Closing Date, Transferred Employees
and their covered dependents.
C. Workers Compensation. From and after the Closing
Date, Sellers shall remain solely responsible for any and all
liabilities, claims and obligations to or in respect of any of
Sellers' or any of their Affiliates' employee relating to or
arising in connection with any and all claims for workers'
compensation benefits arising in connection with any occupational
injury or disease occurring or existing on or prior to the
Closing.
D. Employment Taxes. Sellers will, and Vanstar and
Buyer will (i) treat Buyer as a "successor employer" and Sellers
as "predecessors," within the meaning of sections 3121(a)(1) and
3306(b)(1) of the Code, with respect to Transferred Employees who
are employed by Buyer for purposes, and only such purposes, of
Taxes imposed under the United States Federal Unemployment Tax
Act ("FUTA") or the United States Federal Insurance Contributions
Act ("FICA") and (ii) cooperate with each other to avoid, to the
extent possible, the filing of more than one IRS Form W-2 with
respect to each such Transferred Employee for the calendar year
within which the Closing Date occurs.
ARTICLE IV. TERMINATION
A. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
a. by the written agreement of the parties hereto;
b. by either Sellers or Vanstar and Buyer by
written notice to the other parties if the transactions
contemplated hereby shall not have been consummated pursuant
hereto by 5:00 p.m. local Dallas, Texas time on June 30, 1996,
unless such date shall be extended by the mutual written consent
of Sellers, Vanstar and Buyer;
c. by Vanstar and Buyer by written notice to
Sellers if (i) the representations and warranties of either
Seller shall not have been true and correct in all respects (in
the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality
qualification) as of the date when made or (ii) if any of the
conditions set forth in Section 5.1 or 5.2 shall not have been,
or if it becomes apparent that any of such conditions will not
be, fulfilled by 5:00 p.m. local Dallas, Texas time on June 30,
1996, unless such failure shall be due to the failure of Vanstar
or Buyer to perform or comply with any of the covenants,
agreements or conditions hereof to be performed or complied with
by it prior to the Closing; or
d. by Sellers by written notice to Vanstar and
Buyer if (i) the representations and warranties of Vanstar or
Buyer shall not have been true and correct in all respects (in
the case of any representation or warranty containing any
materiality qualification) or in all material respects (in the
case of any representation or warranty without any materiality
qualification) as of the date when made or (ii) if any of the
conditions set forth in Section 5.1 or 5.3 shall not have been,
or if it becomes apparent that any of such conditions will not
be, fulfilled by 5:00 p.m. local Dallas, Texas time on June 30,
1996, unless such failure shall be due to the failure of either
Seller to perform or comply with any of the covenants, agreements
or conditions hereof to be performed or complied with by it prior
to the Closing.
B. Effect of Termination. In the event of the
termination of this Agreement pursuant to the provisions of
Section 7.1, this Agreement shall become void and have no effect,
without any liability to any Person in respect here of or of the
transactions contemplated hereby on the part of any party hereto,
or any of its directors, officers, employees, agents,
consultants, representatives, advisers, stockholders or
Affiliates, except as specified in Section 10.1 and except for
any liability resulting from such party's breach of this
Agreement.
ARTICLE V. NON-COMPETITION AND DELIVERY OF FINANCIAL
STATEMENTS
A. Non-Competition.
a. Except as provided in Section 8.1(b) below,
during the period commencing with the Closing and continuing
thereafter for a period of two (2) years, Dataflex and DSC agree
that they will not and will not permit any of their Affiliates
to, directly or indirectly, own, manage, operate, control,
participate in the ownership, management or control of, or be
connected with or have any interest in, as a stockholder, agent,
partner or otherwise, any business which provides goods, products
or services within the Business Territory competitive with those
currently provided by the Business; provided, however, that
nothing contained herein shall prohibit Sellers from engaging in
or participating in the Onyx Business or prohibit Sellers or any
of their Affiliates from owning less than 5% of any class of
securities listed on a national securities exchange or traded
publicly in the over-the-counter market. Sellers recognize and
acknowledge that irreparable damage will result to Vanstar and
Buyer in the event of a breach of by Sellers or any of their
Affiliates of the provisions of this Section 8.1 and,
accordingly, in the event of such a breach, Buyer shall be
entitled, in addition to any other legal or equitable damages and
remedies to which it may be entitled or which may be available,
to an injunction to restrain the violation thereof. If any
provision of this Section 8.1 shall be adjudicated by a court of
competent jurisdiction to be invalid or unenforceable because of
the scope, duration or area of its applicability, the court
making such determination shall have the power to modify such
scope, duration or area, or all of them and such provision shall
then be applicable in such modified form.
b. From and after the Closing, notwithstanding the
provisions of Section 8.1(a) to the contrary, Sellers shall be
entitled to continue to fulfill their obligations under the
written agreements with the "National Account" customers (the
"National Accounts") described on Schedule 8.1(b) to the extent
relating to written agreements with customers existing as of the
date hereof and only if such participation is incidental to
Sellers' respective business operations outside of the Business
Territory; provided, however, that in fulfilling its obligations
or participating in such business or benefits, Sellers shall not
establish new business locations within the Business Territory,
permit any employees or sales representatives of either of the
Sellers or any of their Affiliates to actively solicit any
business from such National Accounts within the Business
Territory, or outside the Business Territory for the purpose of
servicing orders within the Business Territory, it being
understood and agreed that the sale of products to or the
engagement in other transactions with the National Accounts in
the business Territory is intended to be incidental to and
necessary for Dataflex or DSC and/or their Affiliates to sell
products to or otherwise engage in business transactions with the
National Accounts outside of the Business Territory; and provided
further, that none of the agreements set forth on Schedule 8.1(b)
shall be materially modified or amended if the result is to add
any new customer with locations in the Business Territory.
B. Delivery of Audited Financial Statements. Promptly
following the Closing, Sellers shall cause to be delivered to
Vanstar and Buyer the Annual Financial Statements relating to the
Business, together with such consents to the filing thereof by
Buyer under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended (collectively the
"Securities Acts"). If Dataflex would not, after giving effect
to the consummation of the transactions contemplated in this
Agreement, or otherwise, be required to prepare such Annual
Financial Statements but for the requirement set forth in this
Section 8.2, the direct out-of-pocket costs associated with the
preparation thereof shall be borne by Vanstar. If from time to
time after the delivery of such Annual Financial Statements,
Vanstar shall require auditors consents to the inclusion or the
incorporation by reference of the Annual Financial Statements in
any filing under the Securities Acts, or either of them, Sellers
shall use their respective best efforts to cause the delivery
thereof promptly upon request.
ARTICLE VI. INDEMNIFICATION
A. Indemnification By Sellers. Each Seller covenants
and agrees to defend, indemnify and hold harmless Vanstar and
Buyer and their respective officers, directors, employees,
agents, advisers, representatives and Affiliates (collectively,
the "Buyer Indemnitees") from and against, and pay or reimburse
Buyer Indemnitees for, any and all claims, liabilities,
obligations, losses, fines, costs, royalties, proceedings,
deficiencies or damages (whether absolute, accrued, conditional
or otherwise and whether or not resulting from third party
claims, including out-of pocket expenses and reasonable
attorneys' and accountants' fees) incurred in the investigation
or defense of any of the same or in asserting any of their
respective rights hereunder (collectively, "Losses"), resulting
from or arising out of:
(1) any inaccuracy of any representation or
warranty made by either Seller herein or in any Collateral
Agreement or in connection herewith or therewith;
(2) the Inventory Difference, AR Adjustment
Amount, the VR Adjustment Amount or any other adjustment to the
purchase price contemplated in Section 2.2 or 2.5, including,
without limitation, any adjustments required by Section 2.5(d).
(3) any failure of either Seller to perform
any covenant or agreement hereunder or under any Collateral
Agreement or to fulfill any other obligation in respect hereof or
of any Collateral Agreement;
(4) any Excluded Liabilities, including any
Assumed Liabilities to the extent the aggregate of such Assumed
Liabilities exceeds the Maximum Liability;
(5) the Excluded Assets;
(6) any and all Taxes of either Seller and all
Affiliates of Sellers including, but not limited to, any and all
Taxes arising from or relating to the transactions contemplated
in this Agreement and the Collateral Agreements;
(7) any and all liabilities, obligations or
claims in respect of employees or former employees of either
Seller or any of their Affiliates, including any and all
liabilities, obligations or claims relating to or in respect of
the Transition Employees or any actual or alleged misconduct or
negligence thereof, except, with respect to Transition Employees
and Transferred Employees, to the extent expressly assumed by
Buyer pursuant to Article VI;
(8) all Environmental Liabilities and Costs
arising out of the Operations of the Business prior to the
Closing Date or relating to the Excluded Assets; and
(9) any product liability claim with respect
to any products, goods or services distributed or sold or for
which compensation was received prior to the Closing Date;
(10) any liability or claim by any Person
asserted against Vanstar or Buyer by reason of any actual or
alleged non-compliance by Sellers, or either of them, with any
bulk sales or bulk transfer law of any state, to the extent that
such claims or liabilities have not otherwise been assumed by
Vanstar or Buyer hereunder.
B. Treatment of Sellers. For the purposes of this
Section 9.2, the rights, duties and obligations of Dataflex and
DSC (and their respective successors and assigns) shall be joint
and several, and the action of one of them, or notice to or from
one of them, shall be the action of, notice to or from and
binding upon the other for all purposes. No dissolution,
liquidation, winding up or any other action of either Dataflex or
DSC shall have the effect of limiting the rights, duties or
obligations of Vanstar or Buyer or the Buyer Indemnitees under
this Article IX with respect to Dataflex, DSC or the Seller
Indemnitees, who, in any such circumstance, shall continue to
consist of both Dataflex and DSC (and their respective successors
and assigns.)
C. Indemnification By Vanstar and Buyer. Vanstar and
Buyer each covenant and agree to defend, indemnify and hold
harmless Sellers and their officers, directors, employees,
agents, advisers, representatives and Affiliates (collectively,
the "Seller Indemnitees") from and against any and all Losses
resulting from or arising out of:
(1) any inaccuracy in any representation or
warranty by Vanstar or Buyer made or contained in this Agreement
or any Collateral Agreement; or
(2) any failure of Vanstar or Buyer to perform
any covenant or agreement made or contained in this Agreement or
any Collateral Agreement or to fulfill any other obligation in
respect thereof;
(3) the Assumed Liabilities;
(4) except to the extent provided for in
Section 6.5 or this Section 9.3, the operation of the Business by
Buyer or Buyer's ownership, operation or use of the Assets
following the Closing Date; and
(5) any actual or alleged act or failure to
act by any Transition Employee occurring after the Closing and
while such Transition Employee is employed by Sellers, or either
of them, at the request of Vanstar or Buyer pursuant to
Section 6.1(c);
except, in the case of clause (iv) or (v) to the extent such
Losses result from or arise out of the Excluded Liabilities or
are attributable to acts or circumstances occurring prior to the
Closing Date or constitute Losses for which Seller is required to
indemnify Buyer Indemnitees under Article IX.
D. Adjustments to Indemnification Payments. Any payment
made by either Seller to Buyer Indemnitees, on the one hand, or
by Vanstar or Buyer to Seller Indemnitees, on the other hand,
pursuant to this Article IX in respect of any claim shall be net
of any insurance proceeds realized by and paid to the Indemnified
Party in respect of such claim. The Indemnified Party shall use
its reasonable efforts to make insurance claims relating to any
claim for which it is seeking indemnification pursuant to this
Article IX; provided that the Indemnified Party shall not be
obligated to make such an insurance claim if the Indemnified
Party in its reasonable judgment believes that the cost of
pursuing such an insurance claim together with any corresponding
increase in insurance premiums or other chargebacks to the
Indemnified Party, as the case may be, would exceed the value of
the claim for which the Indemnified Party is seeking
indemnification.
E. Indemnification Procedures. In the case of any claim
entitling a party hereto to indemnification (the "Indemnified
Party"), notice shall be given by the Indemnified Party to the
party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and
the Indemnified Party shall permit the Indemnifying Party (at the
expense of such Indemnifying Party) to assume the defense of any
claim or any litigation resulting therefrom; provided that (1)
the counsel for the Indemnifying Party who shall conduct the
defense of such claim or litigation shall be reasonably
satisfactory to the Indemnified Party, (ii) the Indemnified Party
may participate in such defense at such Indemnified Party's
expense, and (iii) the omission by any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying
Party of its indemnification obligation under this Agreement
except to the extent that such omission results in a failure of
actual notice to the Indemnifying Party and such Indemnifying
Party is materially damaged as a result of such failure to give
notice. Except with the prior written consent of the Indemnified
Party, no Indemnifying Party, in the defense of any such claim or
litigation, shall consent to entry of any judgment or enter into
any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include
as an unconditional term thereof the giving by each claimant or
plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation. In the event
that the Indemnified Party shall in good faith determine that the
conduct of the defense of any claim subject to indemnification
thereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the
Indemnified Party's Tax liability or the ability of the
Indemnified Party to conduct its business, or that the
Indemnified Party may have available to it one or more defenses
or counterclaims that are inconsistent with one or more of those
that may be available to the Indemnifying Party in respect of
such claim or any litigation relating thereto, the Indemnified
Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation
relating to any such claim at the sole cost of the Indemnifying
Party, provided that if the Indemnified Party does so take over
and assume control, the Indemnified Party shall not settle such
claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld.
In the event that the Indemnifying Party does not accept the
defense of any matter as above provided, the Indemnified Party
shall have the full right to defend against any such claim or
demand and shall be entitled to settle or agree to pay in full
such claim or demand. In any event, the Indemnifying Party and
the Indemnified Party shall cooperate in the defense of any claim
or litigation subject to this Section 9.5 and the records of each
shall be available to the other with respect to such defense.
F. Time Limitation. All claims for indemnification
under clause (i) of the first sentence of Section 9.1 or clause
(i) of the first sentence of Section 9.3 must be asserted within
30 days of the termination of the respective survival periods set
forth in Section 9.7.
G. Survival of Representations and Warranties, etc. The
representations and warranties contained in this Agreement shall
survive the execution and delivery of this Agreement, any
examination by or on behalf of the parties hereto and the
completion of the transactions contemplated herein, but only to
the extent specified below:
a. except as set forth in clauses (b) and (c)
below, the representations and warranties contained in Section
3.1 and Section 3.2 shall survive for a period of 3 years
following the Closing Date.
b. the representations and warranties contained in
Sections 3.1.1, 3.1.2, 3.1.3, 3.1.11, 3.1.13, 3.1.22, 3.2.1 and
3.2.2 shall survive without limitation; and
c. the representations and warranties of Seller
contained in Section 3.1.6 shall survive as to any Tax covered by
such representations and warranties for so long as any statute of
limitations for such Tax remains open, in whole or in part,
including without limitation, by reason of waiver of such statute
of limitations.
ARTICLE VII. MISCELLANEOUS
A. Expenses. Except as provided in Section 8.2, each
Seller, on the one hand, and Vanstar and Buyer, on the other
hand, shall bear their respective expenses, costs and fees
(including attorneys', auditors' and financing commitment fees)
in connection with the transactions contemplated hereby,
including the preparation, execution and delivery of this
Agreement and compliance herewith (the "Transaction Expenses"),
whether or not the transactions contemplated hereby shall be
consummated.
B. Severability. If any provision of this Agreement,
including any phrase, sentence, clause, section or subsection is
inoperative or unenforceable for any reason, such circumstances
shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance,
or of rendering any other provision or provisions herein
contained invalid, inoperative, or unenforceable to any extent
whatsoever.
C. Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been
duly given if (a) delivered personally or (b) sent by reputable
next-day or overnight mail or delivery, proof of delivery
requested.
(1) if to Vanstar or Buyer,
Vanstar Corporation
5964 W. Las Positas Blvd.
Pleasanton, CA 94566-9012
Attention: General Counsel
with a copy to:
Stanley R. Huller, Esq.
Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
(2) if to Sellers,
Dataflex Corporation
Dataflex Southwest Corporation
3920 Park Avenue
Edison, New Jersey 08820
Attention: Chairman
with a copy to:
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel
Metro Corporate Campus One
P. O. Box 5600
Woodbridge, NJ 07095
Attention: W. Raymond Felton, Esq.
or, in each case, at such other address as may be specified in
writing to the other parties hereto.
All such notices, requests, demands, waivers and other
communications shall be deemed to have been received (w) if by
personal delivery on the day of such delivery, or (x) if by
next-day or overnight mail or delivery, on the day after
delivery.
D. Headings. The headings contained in this Agreement
are for purposes of convenience only and shall not affect the
meaning or interpretation of this Agreement.
E. Entire Agreement. This Agreement (including the
Schedules hereto) and the Collateral Agreements (when executed
and delivered) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
F. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed an original
and all of which shall together constitute one and the same
instrument.
G. Governing Law, etc. This Agreement shall be governed
in all respects, including as to validity, interpretation and
effect, by the internal laws of the State of Delaware, without
giving effect to the conflict of laws rules thereof.
H. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective heirs, successors and permitted assigns.
I. Assignment. This Agreement shall not be assignable
or otherwise transferable by any party hereto without the prior
written consent of the other parties hereto. In the event of any
merger, consolidation, liquidation, dissolution or winding up of
or similar transaction involving either Dataflex or DSC, Dataflex
and DSC shall cause any Person who shall be a successor to or
assignee of the property of Dataflex or DSC, as the case may be,
or the recipient of any distribution by Dataflex or DSC in
respect of its equity securities to assume the obligations of
Sellers hereunder, without restriction, and shall deliver notice
of such transaction and assumption to Vanstar and Buyer not less
than thirty (30) days prior to the consummation thereof.
J. No Third Party Beneficiaries. Except as provided in
Article IX with respect to indemnification of Indemnified Parties
hereunder, nothing in this Agreement shall confer any rights upon
any Person or entity other than the parties hereto and their
respective, successors and permitted assigns. Without limiting
the generality of the foregoing, no provision of this Agreement
or any Collateral Agreement shall constitute an offer, guaranty
or contract of employment.
K. Amendment; Waivers, etc. No amendment, modification
or discharge of this Agreement, and no waiver hereunder, shall be
valid or binding unless set forth in writing and duly executed-by
the party against whom enforcement of the amendment,
modification, discharge or waiver is sought. Any such waiver
shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the
rights of the party granting such waiver in any other respect or
at any other time. Neither the waiver by any of the parties
hereto of a breach of or a default under any of the provisions of
this Agreement, nor the failure by any of the parties, on one or
more occasions, to enforce any of the provisions of this
Agreement or to exercise any right or privilege hereunder, shall
be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights
or privileges hereunder. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies
that any party may otherwise have at law or in equity. The rights
and remedies of any party based upon, arising out of or otherwise
in respect of any inaccuracy or breach of any representation,
warranty, covenant or agreement or failure to fulfill any
condition shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim
of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant or
agreement as to which there is no inaccuracy or breach. The
representations and warranties of Sellers shall not be affected
or deemed waived by reason of any investigation made by or on
behalf of Vanstar or Buyer (including but not limited to, by any
of its advisors, consultants or representatives) or by reason of
the fact that Vanstar or Buyer or any of such advisors,
consultants or representatives knew or should have known that any
such representation or warranty is or might be inaccurate
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
VANSTAR CORPORATION
By:
Name:
Title:
VST WEST, INC.
By:
Name:
Title:
DATAFLEX CORPORATION
By:
Name:
Title:
DATAFLEX SOUTHWEST CORPORATION
By:
Name:
Title:
37715.5H
